Exhibit 10.3


 


AMENDED AND RESTATED TERM LOAN AGREEMENT


 


THIS
AGREEMENT (this “Agreement”) is made and
entered into as of the        day of July, 2008,
by and between COMVEST CAPITAL LLC,
a Delaware limited liability company (the “Lender”), and CRDENTIA CORP., a Delaware corporation (the
“Borrower”).


 


W  I  T  N  E
S  S  E  T  H :


 


WHEREAS,
the Borrower and its Active Subsidiaries are engaged in the business of
providing healthcare staffing services to hospitals and other healthcare
facilities throughout the United States (the “Business Operations”); and


 


WHEREAS,
the Lender and the Borrower are parties to a Revolving Credit and Term Loan
Agreement dated as of February 22, 2008 (the “Original Agreement”)
pursuant to which the Lender has made available to the Borrower a revolving
credit facility and two term loans;


 


WHEREAS,
in connection with certain other transactions being consummated on the Closing
Date (as such term is hereinafter defined), the Borrower desires to refinance
with another lender the revolving credit facility heretofore provided to the
Borrower by the Lender, to obtain an increase in the term loans provided by the
Lender, and to redeem from the Lender the Original Warrant (as such term is
hereinafter defined); and


 


WHEREAS,
the Lender is willing and able to effect such modifications and such
redemption, on the terms and conditions of this Agreement;


 


NOW,
THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereby agree as follows:


 


I.                                        DEFINITIONS


 


Section 1.01.  Defined Terms.  In addition to the other terms defined
elsewhere in this Agreement, as used herein, the following terms shall have the
following meanings:


 


“Act”
shall mean the Securities Act of 1933, as amended, and the rules and
regulations thereunder.


 


“Active
Subsidiaries” shall mean those Subsidiaries listed as such on Schedule
1.01 of the Disclosure Schedule.


 


“Affiliate”
shall mean, with respect to any Person, any other Person in Control of,
Controlled by, or under common Control with the first Person, and any other
Person who has a substantial interest, direct or indirect, in the first Person
or any of its Affiliates, including, without limitation, any officer or
director of the first Person or any of its Affiliates; provided, however,
that, except as otherwise provided herein, neither the Lender nor any of its
Affiliates shall be deemed an “Affiliate” of the Borrower for any purposes of
this Agreement.  For the purpose of this
definition, a “substantial interest” shall mean the direct or indirect legal or
beneficial ownership of more than ten (10%) percent of any class of stock or
similar interest.


 

















 


“Agreement”
shall mean this Amended and Restated Term Loan Agreement as it may from time to
time be amended, modified, supplemented and/or restated.


 


“Applicable
Law” shall mean all applicable provisions of all (a) constitutions,
statutes, ordinances, rules, regulations and orders of all governmental and/or
quasi-governmental bodies, (b) Government Approvals, and (c) order,
judgments and decrees of all courts and arbitrators.


 


“Business
Day” shall mean a day other than (a) a Saturday, (b) a Sunday, or
(c)  a day on which banking institutions in either the State of Florida or
the State of Texas are authorized or required by law or executive order to
close.


 


“Capital
Expenditures” shall mean with respect to any Person, all expenditures of
such Person for tangible assets which are capitalized, and the fair value of
any tangible assets leased by such Person under any lease which would be a
Capitalized Lease, determined in accordance with GAAP, including all amounts
paid or accrued by such Person in connection with the purchase (whether on a
cash or deferred payment basis) or lease (including Capitalized Lease
Obligations) of any machinery, equipment, real property, improvements to real
property (including leasehold improvements), or any other tangible asset of
such Person which is required, in accordance with GAAP, to be treated as a
fixed asset on the consolidated balance sheet of such Person.


 


“Capitalized
Lease” shall mean any lease which is or should be capitalized on the
balance sheet of the lessee thereunder in accordance with GAAP.


 


“Capitalized
Lease Obligation” shall mean with respect to any Person, the amount of the
liability which reflects the amount of future payments under all Capitalized
Leases of such Person as at any date, determined in accordance with GAAP.


 


“Cash
Equivalents” shall mean (a) marketable securities issued, or directly
and fully guaranteed or insured, by the United States of America or any agency
or instrumentality thereof (provided that the full faith and credit of the
United States of America is pledged in support thereof) having maturities of
not more than twelve (12) months from the date of acquisition; (b) time
deposits, demand deposits, certificates of deposit, acceptances or prime
commercial paper issued by, or repurchase obligations for underlying securities
of the types described in clause (a) entered into with any commercial bank
having a short-term deposit rating of at least A-2 or the equivalent thereof by
Standard & Poor’s Corporation or at least P-2 or the equivalent
thereof by Moody’s Investors Service, Inc.; (c) commercial paper with
a rating of A-I or A-2 or the equivalent thereof by Standard & Poor’s
Corporation or P-1 or P-2 or the equivalent thereof by Moody’s Investors
Service, Inc. and in each case maturing within twelve (12) months after
the date of acquisition; (d) marketable direct obligations issued by any
state in the United States or any agency or instrumentality thereof maturing
within twelve (12) months from the date of acquisition thereof and, at the time
of acquisition, have one of the two highest ratings generally obtainable from
either Standard & Poor’s Corporation or Moody’s Investors Services, Inc.;
(e) tax-exempt commercial paper of United States municipal, state or local
governments rated at least A-2 or the equivalent thereof by Standard &
Poor’s Corporation or at least P-2 or the equivalent thereof by Moody’s
Investors Services, Inc. and maturing within twelve (12) months after the
date of acquisition thereof; (f) any other items selected by the 


 


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Borrower and approved by the Lender (which approval shall not be
unreasonably withheld or delayed); or (g) any mutual fund or other pooled
investment vehicle which invests principally in the foregoing obligations.


 


“Closing
Date” shall mean the date on which the conditions set forth in Article IV
below have been satisfied, the additional incremental portion of the
Tranche B Term Loan is funded to the Borrower, and the Borrower has issued
to the Lender the Tranche C Term Note.


 


“Closing
Fees” shall mean a closing fee in the amount of $45,000, which shall be
payable to the Lender in accordance with Section 2.03(a) below.


 


“Code”
shall mean the Internal Revenue Code of 1986, and the rules and
regulations promulgated thereunder, as in effect from time to time.


 


“Collateral”
shall mean all collateral pledged by the Borrower and/or any of the
Subsidiaries as security for the payment and performance of the Obligations,
whether pursuant to the Collateral Agreement or any other Security Document.


 


“Collateral
Agreement” shall mean the Collateral Agreement, dated as of the Original
Closing Date, by and among the Borrower, the Active Subsidiaries and the
Lender, as same may be amended, modified, supplemented and/or restated from
time to time.


 


“Common
Stock” shall mean the authorized common stock of the Company, $.0001 par
value per share.


 


“Confidential
Information” shall mean information that the Borrower furnishes to the
Lender pursuant to any Loan Document, but does not include any such information
once such information has become, or if such information is, generally
available to the public or available to the Lender from a source other than the
Borrower which is not, to the Lender’s knowledge, bound by any confidentiality
agreement in respect thereof.


 


“Contract”
shall mean any indenture, agreement (other than this Agreement), other
contractual restriction, lease in which the Borrower or any Subsidiary is a
lessor or lessee, license or instrument.


 


“Control”
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether through
the ownership of voting securities, by contract or otherwise, and the terms “Controlling”
and “Controlled” shall have meanings correlative thereto.


 


“Control
Agreement” shall mean, with respect to each bank account (including lockbox
service) and/or securities account maintained by or in the name of the Borrower
or any Subsidiary (other than a Dissolving Subsidiary) from time to time, an
agreement executed and delivered by the Borrower (or the subject Subsidiary, as
applicable) and the account intermediary, whereby the account intermediary
acknowledges the Lender’s Lien on such account and all funds or property
therein, and “control” (within the meaning of the UCC) over such account is
established in favor of the Lender.


 


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“Default”
shall mean any of the events specified in Article VII hereof, whether or
not any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.


 


“Disclosure
Schedule” shall mean the disclosure schedule, dated as of the Closing Date,
executed and delivered by the Borrower to the Lender, the section numbers of
which correspond to the Section numbers of this Agreement.


 


“Dissolving
Subsidiaries” shall mean those Subsidiaries listed as such on Schedule
1.01 of the Disclosure Schedule.


 


“Dollars”
or “$” shall mean United States Dollars, lawful currency for the payment
of public and private debts.


 


“Domestic
Subsidiary” shall mean any Subsidiary which is incorporated or formed under
the laws of the United States, any State or Commonwealth in the United States,
or the District of Columbia.


 


“EBITDA” shall mean, for the subject
period, for the Borrower and its Subsidiaries on a consolidated basis, the sum
of (a) Net Income, plus (b) Interest Expense deducted in the
calculation of such Net Income, plus (c) all income taxes deducted
in the calculation of such Net Income, plus (d) depreciation and
amortization expense deducted in the calculation of such Net Income, plus
(e) other non-cash charges and expenses deducted in the calculation of
such Net Income, excluding accruals for cash expenses made in the ordinary
course of business, minus (f) any and all dividends and distributions
made by the Borrower to its stockholders.


 


“ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as in effect
from time to time.


 


“ERISA
Affiliate” shall mean, with respect to any Person, any other Person which
is under common control with the first Person within the meaning of Section 414(b) or
414(c) of the Code; provided, however, that with respect to
the Borrower, no Person which is an Affiliate of the Lender (other than the
Borrower and its Subsidiaries) shall be deemed an ERISA Affiliate for purposes
of this Agreement


 


“Event of
Default” has the meaning set forth in Article VII below.


 


“Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended.


 


“Financial
Statements” has the meaning set forth in Section 3.01(a) below.


 


“Fiscal
Year” shall mean the fiscal year of the Borrower which ends on December 31
of each year.


 


“Fixed
Charges” shall mean, for the period in question, the sum of (a) all
principal payments scheduled or required to be made during or with respect to
such period in respect of Indebtedness of the Borrower and its Subsidiaries, plus
(b) all Interest Expense of the Borrower


 


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and its Subsidiaries for such period, plus (c) all income
taxes paid or accrued for the Borrower and its Subsidiaries for such period.


 


“Foreign
Subsidiary” shall mean any Subsidiary which is not a Domestic Subsidiary.


 


“GAAP”
shall mean generally accepted accounting principles in the United States of
America, consistently applied, unless the context otherwise requires, with
respect to any financial terms contained herein, as then in effect with respect
to the preparation of financial statements.


 


“Government
Approval” shall mean an authorization, consent, non-action, approval,
license or exemption of, registration or filing with, or report to, any
governmental or quasi-governmental department, agency, body or other unit.


 


“Guaranty”,
“Guaranteed” or to “Guarantee”, as applied to any Indebtedness,
liability or other obligation, shall mean (a) a guaranty, directly or
indirectly, in any manner, including by way of endorsement (other than
endorsements of negotiable instruments for collection in the ordinary course of
business), of any part or all of such obligation, and (b) an agreement,
contingent or otherwise, and whether or not constituting a guaranty, assuring,
or intended to assure, the payment or performance (or payment of damages in the
event of non-performance) of any part or all of such obligation by any means
(including, without limitation, the purchase of securities or obligations, the
purchase or sale of property or services, or the supplying of funds).


 


“Guaranty
Agreement” shall mean the Guaranty Agreement, dated as of the Original
Closing Date (and as same may be amended, modified, supplemented and/or
restated from time to time), executed by each Active Subsidiary in favor of the
Lender, pursuant to which the Active Subsidiaries will guaranty the full and
timely payment and performance of all of the Obligations.


 


“Indebtedness”
shall mean (without duplication), with
respect to any Person, (a) all obligations or liabilities, contingent or
otherwise, for borrowed money, (b) any and all obligations represented by
promissory notes, bonds, debentures or the like, or on which interest charges
are customarily paid, (c) any liability secured by any mortgage, pledge,
lien or security interest on property owned or acquired, whether or not such
liability shall have been assumed, (d) obligations of such Person under
conditional sale or other title retention agreements relating to property or
assets purchased by such Person, (e) all obligations of such Person issued
or assumed as the deferred purchase price of property or services (excluding
trade payables and accrued obligations incurred in the ordinary course of
business), (f) any obligations (contingent or otherwise) of such Person as
an account party or applicant in respect of letters of credit and/or bankers’
acceptances, and (g) Guarantees, endorsements (other than for collection
in the ordinary course of business) and other contingent obligations in respect
of the obligations of others.


 


“Interest Expense” shall mean, for the relevant period, interest
expense (including, without limitation, interest attributable to Capitalized
Leases in accordance with GAAP) and fees with respect to Indebtedness.


 


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“Investment”,
as applied to the Borrower or any Subsidiary, shall mean: (a) any shares
of capital stock, evidence of Indebtedness or other security issued by any
other Person to the Borrower or any Subsidiary, (b) any loan, advance or
extension of credit to, or contribution to the capital of, any other Person,
other than credit terms extended to customers in the ordinary course of
business, (c) any other investment by the Borrower or any Subsidiary in
any assets or securities of any other Person, and (d) any commitment to
make any Investment.


 


“Knowledge”
or “Known” or words of similar import shall mean, with respect to the
Borrower and/or any Subsidiary, the actual knowledge of John B. Kaiser and/or
James J. TerBeest, after reasonable inquiry of the appropriate managerial
employees of the Borrower and the Subsidiaries.


 


“Landlord
Waiver” shall mean a landlord waiver, subordination and/or access
agreement, in form and substance reasonably satisfactory to the Lender, executed
in favor of the Lender by the landlord of a Real Property which is leased by
the Borrower or a Subsidiary as lessee.


 


“Liabilities
and Contingencies” has the meaning set forth in Section 3.01(c) below.


 


“Lien”,
as applied to the property or assets (or the income or profits therefrom) of
the Borrower or any Subsidiary, shall mean (in each case, whether the same is
consensual or nonconsensual or arises by contract, operation of law, legal
process or otherwise): (a) any mortgage, lien, pledge, hypothecation,
attachment, assignment, deposit arrangement, encumbrance, charge, lease
constituting a Capitalized Lease Obligation, conditional sale or other title
retention agreement, or other security interest or encumbrance of any kind in
respect of any property (including, without limitation, stock of any
Subsidiary) of the Borrower or any Subsidiary, or upon the income or profits
therefrom; (b) any arrangement under which any property of the Borrower or
any Subsidiary is transferred, sequestered or otherwise identified for the
purpose of subjecting or making available the same for the payment of
Indebtedness or the performance of any other liability in priority to the
payment of the general, unsecured creditors of the Borrower or any Subsidiary; (c) any
Indebtedness or liability which remains unpaid after the same shall become due
and payable and which, if unpaid, by law or otherwise is given any priority
whatsoever over the general unsecured creditors of the Borrower or any
Subsidiary; and (d) any agreement (other than this Agreement) or other
arrangement which, directly or indirectly, prohibits the Borrower or any
Subsidiary from creating or incurring any lien on any of its properties or
assets or which conditions the ability to do so on the security, on a pro
rata or other basis, of Indebtedness other than Indebtedness outstanding
under this Agreement.


 


“Loan
Documents” shall mean the collective reference to this Agreement, the
Notes, the Security Documents, the Warrant, the Registration Rights Agreement,
and any and all other agreements, instruments, certificates and other documents
as may be executed and delivered by the Borrower and/or any of the Subsidiaries
pursuant hereto or thereto.


 


“Loans” shall mean,
collectively, the Term Loans.


 


“Material
Adverse Effect” shall mean any event, act, omission, condition or
circumstance which has or would reasonably be expected to have a material
adverse effect on (a) 


 


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the business, operations, properties, assets or condition, financial or
otherwise, of the Borrower and the Subsidiaries, taken as a whole, (b) the
ability of the Borrower or any Subsidiary to pay or perform any of its
obligations under any of the Loan Documents, or (c) the validity or
enforceability of, or the Lender’s rights and remedies under, any of the Loan
Documents, other than due to the acts or omissions of the Lender or any of its
Affiliates.


 


“Net Income”
shall mean the consolidated net income (or loss) of the Borrower and its
Subsidiaries for the period in question, after giving effect to deduction of or
provision for all operating expenses, all taxes and reserves (including
reserves for deferred taxes) and all other proper deductions, all determined in
accordance with GAAP; provided, however, that for purposes of
calculating Net Income, there shall be excluded and no effect shall be given to
(a) any restoration of any contingency reserve, except to the extent that
provision for such reserve was made out of income for the subject period, and (b) any
Net Income attributable to any Subsidiary to the extent that the Borrower (or
any Subsidiary through which the Borrower owns the subject Subsidiary) is
prohibited (by law, Contract, minority ownership rights or otherwise) from
receiving a distribution of such Net Income from such Subsidiary.


 


“Notes”
shall mean, collectively, the Term Notes.


 


“Obligations”
shall mean the collective reference to all Indebtedness and other liabilities
and obligations of every kind and description owed by the Borrower and/or any
Subsidiaries to the Lender from time to time under or pursuant to this
Agreement, the Notes, the Security Documents and the other Loan Documents
(excluding the Warrant and Registration Rights Agreement, other than amounts
payable from time to time pursuant to Section 2(c) of the
Registration Rights Agreement), and/or otherwise in respect of the Loans,
however evidenced, created or incurred, fixed or contingent, now or hereafter
existing, due or to become due.


 


“Organic
Documents” shall mean, with respect to any Person, the certificate of
incorporation, articles of incorporation, certificate of formation, certificate
of limited partnership, by-laws, operating agreement, limited partnership
agreement or other such document of such Person.


 


“Original
Agreement” has the meaning ascribed thereto in the second “WHEREAS”
paragraph above.


 


“Original
Closing Date” shall mean the “Closing Date” under and as defined in the
Original Agreement, which was February 22, 2008.


 


“Original
Warrant” shall mean the “Warrant” under and as defined in the Original
Agreement.


 


“Permitted
Indebtedness” shall mean any and all Indebtedness expressly permitted
pursuant to Section 6.01 below.


 


“Permitted
Liens” shall mean those Liens expressly permitted pursuant to Section 6.02
below.


 


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“Person”
shall mean any individual, partnership, corporation, limited liability company,
banking association, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.


 


“Qualified
Proceeds” shall mean any and all net proceeds received by the Borrower (or
any successor entity) or any Subsidiary at any time and from time to time from
any issuance or sale of common stock, preferred stock or other equity
securities (including securities convertible into or exchangeable for capital
stock of the Borrower), except to the extent that such proceeds are, within
sixty (60) days after the receipt thereof, applied to pay the purchase price
and/or directly associated expenses of the Borrower’s acquisition (directly or
through a Wholly-Owned Subsidiary) of another business, in each case subject to
the requirements of this Agreement and the Collateral Agreement.  In determining the amount of such net
proceeds, (a) in the case of an issuance or sale of common stock,
preferred stock or other equity securities, the gross proceeds of the subject
offering, issuance or sale, net of only those reasonable expenses incurred by
the Borrower or the subject Subsidiary directly related to the subject issuance
or sale, exclusive of any fees or commissions paid to any officer, director or
other Affiliate of the Borrower or any Affiliate of any of the foregoing, and (b) in
the case of any “reverse merger,” share exchange or other such transaction, the
total consolidated cash and cash equivalents of the other party or parties to
such transaction at the time of the consummation of such transaction, net of
only those reasonable expenses incurred by such other party or parties directly
related to such transaction, exclusive of any fees or commissions paid to any
officer, director or other Affiliate of the Borrower or such other party or
parties or any Affiliate of any of the foregoing.


 


“Real
Properties” shall mean, collectively, any real properties (land, buildings
and/or improvements) now owned or leased or occupied by the Borrower or any of
the Subsidiaries, and, during the period of the Borrower’s and/or Subsidiary’s
occupancy thereof, any other real properties heretofore owned or leased by the
Borrower or any Subsidiary (provided that, with respect to leased properties,
the term “Real Property” shall refer only to the portion of the subject
property (excluding common areas) leased by the Borrower or a Subsidiary).


 


“Registration
Rights Agreement” shall mean the Amended and Restated Registration Rights
Agreement, to be dated as of the Closing Date, made by the Borrower for the
benefit of the Lender and any subsequent Holders (as such term is defined in
the Registration Rights Agreement), as same may be amended, modified,
supplemented and/or restated from time to time.


 


“Revolving
Loan Agreement” shall mean the Loan and Security Agreement, dated as of the
Closing Date, by and between Capital TempFunds, a division of Capital Business
Credit LLC, and the Borrower, as same may be amended, modified, supplemented
and/or restated from time to time.


 


“Revolving
Obligations” shall mean the Borrower’s obligations under Revolving Loan
Agreement and any related promissory notes, security agreements or other
related agreements from time to time.


 


“Sale”
shall mean any transaction or series of related transactions (a) whereby a
majority of the outstanding capital stock of the Borrower which ordinarily has
voting power for 


 


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the election of directors (including preferred stock counted on an “as
converted” basis into common stock and common stock counted on a fully diluted
basis) is sold, assigned or transferred, (b) whereby the Borrower issues
shares of its capital stock which, after giving effect to such transaction or
transactions, constitute a majority of the outstanding capital stock of the
Borrower which ordinarily has voting power for the election of directors
(including preferred stock counted on an “as converted” basis into common stock
and common stock counted on a fully diluted basis), (c) whereby Control of
the Borrower is held by a Person (or group of Persons acting in concert) who
does not hold such Control on the date of this Agreement, (d)  in which
the Borrower is a constituent party to any merger or consolidation and as a
result thereof (i) the holders of the outstanding capital stock of the
Borrower which ordinarily has voting power for the election of directors
(including preferred stock counted on an “as converted” basis into common
stock) immediately prior to such merger or consolidation cease to own a
majority of the outstanding capital stock of the Borrower which ordinarily has
voting power for the election of directors (including preferred stock counted
on an “as converted” basis into common stock), or (ii) the Borrower is not
the surviving corporation, or (e) whereby all or any material portion of
the assets of the Borrower or any Subsidiary are sold, assigned or transferred;
provided, however, that a “Sale” shall not be deemed to have
occurred by reason of any of the aforedescribed transactions (other than a sale
of assets) if, after giving effect to the consummation of the subject
transaction, (A) the Borrower or the surviving entity in such transaction
shall be a corporation whose common stock is traded or listed on any national
securities exchange, the Nasdaq Global Market, or the Nasdaq Global Select
Market or is actively quoted on the OTC Bulletin Board, (B) if the
surviving entity is not the Borrower, then such surviving entity assumes all of
the Borrower’s obligations under the Warrant (on the same exchange or
conversion basis as the outstanding Common Stock was treated in the subject
transaction) and the Registration Rights Agreement, (C) the Borrower or
other surviving entity is Controlled by one or more substantial stockholders of
the Borrower on the date of this Agreement, and (D) no Default or Event of
Default occurred in the performance of the subject transaction or exists upon
the consummation of the subject transaction.


 


“SEC”
shall mean the United States Securities and Exchange Commission, and any
successor agency performing the functions thereof.


 


“SEC
Reports” shall mean the periodic and current reports, registration
statements, proxy statements and other reports filed or required to be filed by
the Borrower with the SEC pursuant to the Act and/or the Exchange Act, and any
amendments or supplements thereto filed with the SEC.


 


“Security
Documents” shall mean the Collateral Agreement, any collateral assignments,
control agreements, financing statements or other such agreements or documents
pursuant thereto, the Guaranty Agreement, the Validity Guaranties, and any
other agreements or instruments (including, without limitation, Control
Agreements and Landlord Waivers) securing or creating or evidencing Liens
securing the Obligations.


 


“Subordinated
Debt” shall mean all Indebtedness for money borrowed and other liabilities
of the Borrower, whether or not evidenced by promissory notes, which is
contractually subordinated in right of payment, in a manner satisfactory to the
Lender (as evidenced by the Lender’s prior written approval thereof), to all
Obligations of the Borrower to the Lender.


 


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“Subsidiary”
or “Subsidiaries” shall mean the individual or collective reference to
any corporation, limited liability company or other entity of which 50% or more
of the outstanding shares of stock or other equity interests of each class
having ordinary voting power and/or rights to profits (other than stock having
such power only by reason of the happening of a contingency) is at the time
owned by the Borrower, directly or indirectly through one or more Subsidiaries
of the Borrower.


 


“Term Loans”
shall mean the collective reference to the Tranche A Term Loan, the Tranche B
Term Loan and the Tranche C Term Loan.


 


“Term Notes”
shall mean the promissory notes of the Borrower issued to the Lender as
described in Section 2.02(e) below.


 


“Term Notes
Maturity Date” shall mean February 28, 2011.


 


“Tranche A
Term Loan” shall mean the term loan in the principal amount of $2,500,000
made pursuant to the Original Agreement, and as amended pursuant to the terms
of the Tranche A Term Note.


 


“Tranche A
Term Note” shall mean the amended and restated promissory note of the
Borrower to be issued pursuant to Section 2.02(e) below to evidence
the amended Tranche A Term Loan.


 


“Tranche B
Term Loan” shall mean the term loan in the principal amount of $4,000,000
made pursuant to the Original Agreement and as increased pursuant to Section 2.02(a) below.


 


“Tranche B
Term Note” shall mean the amended and restated promissory note of the
Borrower to be issued pursuant to Section 2.02(e) below to evidence
the increased Tranche B Term Loan.


 


“Tranche C
Term Loan” shall mean the term loan in the principal amount of $2,400,000
to be made pursuant to Section 2.02(a) below.


 


“Tranche C
Term Note” shall mean the promissory note of the Borrower to be issued
pursuant to Section 2.02(e) below to evidence the Tranche C Term
Loan.


 


“UCC”
means the Uniform Commercial Code as in effect in the State of New York on the
date hereof and hereafter from time to time.


 


“Validity
Guaranties” shall mean the collective reference to the Validity Guaranties,
dated as of the Original Closing Date, by and among the Lender, the Borrower
and John B. Kaiser, and by and among the Lender, the Borrower and James J.
TerBeest, respectively.


 


“Warrant”
shall mean the warrant to purchase shares of Common Stock (such warrant
covering an aggregate of 525,000 shares of Common Stock, subject to adjustment)
to be issued by the Borrower to the Lender on the Closing Date.


 


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“Wholly-Owned
Subsidiary” shall mean each Domestic Subsidiary of which all of the
outstanding equity securities (other than directors’ qualifying shares) are
owned by the Borrower or another such Wholly-Owned Subsidiary.


 


Section 1.02.  Use of Defined Terms.  All terms defined in this Agreement shall
have their defined meanings when used in the Notes, the Security Documents, the
other Loan Documents, and all certificates, reports or other documents made or
delivered pursuant to this Agreement, unless otherwise defined therein or unless
the specific context shall otherwise require.


 


Section 1.03.  Accounting Terms.  All accounting terms not specifically defined
herein shall be construed in accordance with GAAP.


 


Section 1.04.  Other Definitional Provisions.  The words “hereof,” “herein”, “hereto” and “hereunder”
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
Section references are to this Agreement unless otherwise specified.  The meanings given to terms defined herein
shall be equally applicable to both the singular and plural forms of such
terms.  The word “including” and words of
similar import when used in this Agreement shall mean “including, without
limitation,” unless otherwise specified.


 


II.                                    GENERAL
TERMS


 


Section 2.01.                             Revolving
Credit Loans.


 


(a)                                  The
Lender and the Borrower hereby confirm that the Revolving Credit Commitment
pursuant to the Original Agreement is hereby terminated and of no further force
or effect, subject only to the required repayment of all Advances and unpaid
accrued interest thereon and accrued Monitoring Fees (as such term is defined
in the Original Agreement) on the Closing Date as contemplated by Section 4.03
below.


 


(b)                                 By
reason of the termination of Revolving Credit Commitment, the Lender shall be
under no further obligation to make any Advances (as such term is defined the
Original Agreement) to the Borrower.


 


Section 2.02.  Term Loans.


 


(a)                                  The
Lender has heretofore loaned to the Borrower (i) a Tranche A Term
Loan in the principal amount of $2,500,000, which has a current principal
balance of $2,500,000, and (ii) a Tranche B Term Loan in the
principal amount of $2,500,000, which has a current principal balance of
$2,500,000.  On the Closing Date, subject
to the terms and conditions of this Agreement, (A) the Lender shall loan
to the Borrower an additional principal amount of $1,500,000, which shall be
added to the principal of the Tranche B Term Loan, and (B) the Lender
shall sell to the Borrower, and the Borrower shall purchase and redeem from the
Lender, the Original Warrant for an aggregate purchase price of $2,400,000,
which shall be evidenced by and paid pursuant to the terms of the
Tranche C Term Note (the principal amount of which is referred to herein
as the “Tranche C Term Loan”). 
Any principal amounts repaid in respect of the Term Loans may not be
reborrowed.


 


11

















 


(b)                                 The
Term Loans shall be repayable in accordance with the schedules of payments set
forth in the Term Notes.  The Borrower
shall be required to prepay the Term Loans (i) in full upon the
consummation of any Sale, and (ii) in part from time to time in the event
and to the extent of 33% of any and all Qualified Proceeds received by the
Borrower or any Subsidiary from time to time. 
With respect to any prepayment under the foregoing clause (ii), same
shall be due and payable as and when the amount of Qualified Proceeds is
determined (i.e., upon receipt of such Qualified Proceeds in the event that no
acquisition transaction is then pending, or sixty (60) days after receipt of
such Qualified Proceeds to the extent that such Qualified Proceeds have not
been applied to the purchase price and/or related expenses of a consummated
business acquisition), and shall be applied to the principal of the Term Notes
ratably in proportion to the respective principal balances thereof.


 


(c)                                  The
Borrower shall pay the Lender interest on the principal balance of the Term
Loans at the rate(s) per annum as in effect from time to time in
accordance with the Term Notes.  Such
interest shall be payable monthly in arrears on the first day of each calendar
month and on the Term Loans Maturity Date, and shall be computed on the daily
unpaid balance of each Term Loan, based on a three hundred sixty (360) day
year, counting the actual number of days elapsed.


 


(d)                                 Unless
sooner due and payable by reason of an Event of Default hereunder having
occurred, the Borrower shall pay to the Lender all of the then-outstanding Obligations
in respect of the Term Loans on the Term Loans Maturity Date.


 


(e)                                  The
Tranche A Term Loan shall be evidenced by a secured Amended and Restated Term
Note of the Borrower payable to the Lender or registered assigns, the Tranche B
Term Loan shall be evidenced by a secured Amended and Restated Term Note of the
Borrower payable to the Lender or registered assigns, and the Tranche C
Term Loan shall be evidenced by a secured Term Note of the Borrower payable to
the Lender or registered assigns.


 


(f)                                    In
order to induce the Borrower to redeem the Original Warrant and issue the
Tranche C Term Note, the Lender hereby represents and warrants to the
Borrower that (i) the Lender is a limited liability company duly formed,
validly existing and in good standing under the laws of the State of Delaware, (ii) the
Lender has full power and authority to sell the Original Warrant to the
Borrower hereunder, and such sale has been duly authorized by all necessary
company action on the part of the Lender, (iii) the Lender is sole legal
and beneficial owner and holder of Original Warrant, free and clear of any and
all liens, pledges, security interests, encumbrances or other adverse claims or
interests of any kind whatsoever, and (iv) the sale of the Original
Warrant to the Borrower hereunder does not constitute a breach or violation of,
or conflict with, any other agreements or commitments to which the Lender is a
party or by which the Lender is bound, or require the Lender to obtain the
consent of any other Person.  The Lender
makes no other representations or warranties with respect to Original Warrant
or the value thereof, and the Borrower hereby acknowledges that it has formed
its own independent determination of the terms and conditions of its purchase
of the Original Warrant hereunder.


 


Section 2.03.  Fees and
Premiums.


 


(a)                                  The
Borrower shall pay the Closing Fees to the Lender simultaneously with the
funding of the incremental portion of the Tranche B Term Loan, and the
exchange of the 


 


12

















 


Original Warrant for the Tranche C Term Note, on the Closing
Date.  The Closing Fees shall be deemed
fully earned on the Closing Date, and shall not be refundable in whole or in
part and shall not be subject to reduction or set-off under any circumstances.


 


(b)                                 In
the event of any prepayment of all or any portion of the Tranche B Term Loan at
any time prior to February 22, 2010, in addition to the payment of the
subject principal amount and all unpaid accrued interest thereon, the Borrower
shall be required to pay to the Lender a prepayment premium in an amount equal
to two (2%) percent of the principal amount being prepaid; provided, however,
that no such prepayment premium shall be required in respect of any mandatory
prepayment pursuant to Section 2.02(b)(ii) above.


 


(c)                                  Payments
received in respect of the Obligations after 2:00 p.m. Eastern time on any
day shall be deemed to be received on the next succeeding Business Day, and if
any payment is received other than by wire transfer of immediately available
funds, such payment shall be subject to three (3) Business Days’ clearance
prior to being credited to the Obligations for interest calculation purposes.


 


Section 2.04.  Use of Proceeds.  The Borrower shall utilize the proceeds of
incremental additional Tranche B Term Loan to finance business
acquisitions and for working capital and other general corporate purposes of
the Borrower.


 


Section 2.05.  Further Obligations.  With respect to all Obligations for which the
interest rate is not otherwise specified herein or in the Term Notes or
applicable Loan Documents (whether such Obligations arise hereunder, pursuant
to the Notes or Security Documents, or otherwise), such Obligations shall bear
interest at the rate(s) in effect from time to time pursuant to the Notes.


 


Section 2.06.  Application of Payments.  All amounts paid to or received by the Lender
in respect of the Obligations from whatever source (whether from the Borrower,
any Subsidiary pursuant to the Guaranty Agreement, any realization upon any
Collateral, or otherwise) shall, unless otherwise specified in this Agreement
or otherwise directed by the Borrower with respect to any particular payment
(unless an Event of Default shall then be continuing, in which event the Lender
may disregard the Borrower’s direction), be applied (a) first, to
reimburse the Lender for all out-of-pocket costs and expenses incurred by the
Lender which are reimbursable to the Lender in accordance with this Agreement,
the Notes and/or any of the other Loan Documents, (b) next, to any accrued
but unpaid fees or prepayment premiums, (c) next, to unpaid accrued
interest on the Tranche A Term Loan, (d) next, to unpaid accrued interest
on the Tranche B Term Loan, (e) next, to unpaid accrued interest on the
Tranche C Term Loan, (f) next, to the outstanding principal of the Tranche
A Term Loan, to the extent then due and payable, (g) next, to the
outstanding principal of the Tranche B Term Loan, to the extent then due and
payable, (h) next, to the outstanding principal of the Tranche C Term
Loan, to the extent then due and payable, and (i) finally, to the payment
of any other outstanding Obligations; provided, however, that
during the continuance of an Event of Default, the Lender may apply any and all
such amounts to such of the Obligations as the Lender may determine in its sole
and absolute discretion.  After payment
in full of the Obligations, any further amounts paid to or received by the
Lender in respect of the Obligations shall be paid over to the Borrower or such
other Person(s) as may be legally entitled thereto.


 


13
















 


Section 2.07.  Sale.  Anything elsewhere contained in this
Agreement and/or the Notes to the contrary notwithstanding, all Obligations
shall become immediately due and payable, without requirement of notice or
demand, upon the consummation of any Sale.


 


Section 2.08.  Obligations Unconditional.


 


(a)                                  The
payment and performance of all Obligations shall constitute the absolute and
unconditional obligations of the Borrower, and shall be independent of any
defense or rights of set-off, recoupment or counterclaim which the Borrower
might otherwise have against the Lender. 
All payments required by this Agreement and/or the Notes shall be paid
free of any deductions or withholdings for any taxes or other amounts and
without abatement, diminution or set-off. 
If the Borrower is required by law to make such a deduction or
withholding from a payment hereunder, the Borrower shall pay to the Lender such
additional amount as is necessary to ensure that, after the making of such
deduction or withholding, the Lender receives (free from any liability in
respect of any such deduction or withholding) a net sum equal to the sum which
it would have received and so retained had no such deduction or withholding
been made or required to be made.  The
Borrower shall (i) pay the full amount of any deduction or withholding,
which it is required to make by-law, to the relevant authority within the
payment period set by the relevant law, and (ii) promptly after any such
payment, deliver to the Lender an original (or certified copy) official receipt
issued by the relevant authority in respect of the amount withheld or deducted
or, if the relevant authority does not issue such official receipts, such other
evidence of payment of the amount withheld or deducted as is reasonably
acceptable to the Lender.


 


(b)                                 If,
at any time and from time to time after the Closing Date, (i) any change
in any existing law, regulation, treaty or directive or in the interpretation
or application thereof, (ii) any new law, regulation, treaty or directive
enacted or application thereof, or (iii) compliance by the Lender with any
request or directive (whether or not having the force of law) from any
governmental authority (A) subjects the Lender to any tax, levy, impost,
deduction, assessment, charge or withholding of any kind whatsoever with
respect to any Loan Document, or changes the basis of taxation of payments to
the Lender of any amount payable thereunder (except for net income taxes, or
franchise taxes imposed in lieu of net income taxes, imposed generally by
federal, state or local taxing authorities with respect to interest or
commitment fees or other fees payable hereunder or changes in the rate of tax
on the overall net income of the Lender or its members), or (B) imposes on
the Lender any other condition or increased cost in connection with the
transactions contemplated thereby or participations therein, and the result of
any of the foregoing is to increase the cost to the Lender of making or
continuing any Loan or to reduce any amount receivable hereunder, then, in any
such case, the Borrower shall promptly pay to the Lender any additional amounts
necessary to compensate the Lender, on an after-tax basis, for such additional
cost or reduced amount as determined by the Lender.  If the Lender becomes entitled to claim any
additional amounts pursuant to this Section 2.08(b), the Lender shall
promptly notify the Borrower of the event by reason of which the Lender has
become so entitled, and each such notice of additional amounts payable pursuant
to this Section 2.08(b) submitted by the Lender to the Borrower
shall, absent manifest error, be final, conclusive and binding for all
purposes.


 


Section 2.09.  Reversal of Payments.  To the extent that any payment or payments
made to or received by the Lender pursuant to this Agreement or any other Loan
Document are 


 


14

















 


subsequently invalidated, declared to be fraudulent or preferential,
set aside, or required to be repaid to any trustee, receiver or other person
under any state or federal bankruptcy or other such law, then, to the extent
thereof, such amounts shall be revived as Obligations and continue in full
force and effect hereunder as if such payment or payments had not been received
by the Lender.


 


III.                                 REPRESENTATIONS
AND WARRANTIES


 


The Borrower
hereby makes the following representations and warranties to the Lender, all of
which representations and warranties shall survive the Closing Date, the
delivery of the Notes and the making of the Loans, shall be continuing in
nature so long as any Obligations are outstanding:


 


Section 3.01.  Financial
Matters.


 


(a)                                  The
Borrower has heretofore furnished to the Lender (i) the audited
consolidated financial statements (including balance sheets, statements of
income and statements of cash flows) of the Borrower and its Subsidiaries as at
December 31, 2005, 2006 and 2007, and for the Fiscal Years then ended, and
(ii) the unaudited consolidated financial statements of the Borrower and
its Subsidiaries as of March 31, 2008 and for the three (3) months
then ended (collectively, the “Financial Statements”).


 


(b)                                 The
Financial Statements (i) have been prepared in accordance with GAAP and
Regulation S-X promulgated under the Act on a consistent basis for all periods
(subject, in the case of unaudited statements, to the absence of full footnote
disclosures, and to normal non-material audit adjustments), (ii) are
complete and correct in all material respects, (iii) fairly present the
consolidated financial condition of the Borrower and its Subsidiaries as of
said dates, and the results of their operations for the periods stated, (iv) contain
and reflect all necessary adjustments and accruals for a fair presentation of
the Company’s consolidated financial condition and the results of its
consolidated operations as of the dates of and for the periods covered by such
Financial Statements, and (v) make full and adequate provision, subject to
and in accordance with GAAP, for the various assets and liabilities (including,
without limitation, deferred revenues) of the Company and its Subsidiaries,
fixed or contingent, and the results of their operations and transactions in
their accounts, as of the dates and for the periods referred to therein.


 


(c)                                  Except
as set forth in Schedule 3.01 of the Disclosure Schedule, the Borrower
and its Subsidiaries do not have any liabilities, obligations or commitments of
any kind or nature whatsoever, whether absolute, accrued, contingent or
otherwise (collectively “Liabilities and Contingencies”), including, without
limitation, Liabilities and Contingencies under employment agreements and with
respect to any “earn-outs”, stock appreciation rights, or related compensation
obligations, except: (i) Liabilities and Contingencies disclosed in the
Financial Statements or footnotes thereto, (ii) Liabilities and
Contingencies incurred in the ordinary course of business and consistent with
past practice since the date of the most recent Financial Statements, or (iii) those
Liabilities  and Contingencies which are
not required to be disclosed under GAAP. 
The reserves, if any, reflected on the consolidated balance sheet of the
Borrower and its Subsidiaries included in the most recent Financial Statements
are appropriate and reasonable.  Neither
the Borrower nor any of its Subsidiaries has had or presently has any
Indebtedness for money borrowed, outstanding obligations for the purchase price
of property, 


 


15

















 


contingent obligations or liabilities for taxes, or any unusual forward
or long-term commitments,  except as
specifically set forth or provided for in the Financial Statements or in Schedule
3.01 of the Disclosure Schedule.


 


(d)                                 Since
the date of the most recent Financial Statements, except for the transactions
pursuant to the Loan Documents and except as set forth in Schedule 3.01
of the Disclosure Schedule, there has been no material adverse change in the
working capital, condition (financial or otherwise), assets, liabilities,
reserves, business, management or Business Operations of the Borrower or any of
its Subsidiaries, including, without limitation, the following:


 


(i)                                     there
has been no material change in any assumptions underlying, or in any methods of
calculating, any bad debt, contingency or other reserve relating to the
Borrower or any Subsidiary;


 


(ii)                                  there
have been (A) no write-downs in the value of any inventory of, and there
have been no write-offs as uncollectible of any notes, accounts receivable or
other receivables of, the Borrower or any Subsidiary other than write-offs of
accounts receivable reserved in full as of the date of the most recent
financial statements delivered to the Lender which would not have a Material
Adverse Effect, and (B) no reserves established for the uncollectibility
of any notes, Accounts or other receivables of the Borrower or any Subsidiary
except to the extent that same have been disclosed to the Lender in writing and
would not, individually or in the aggregate, cause the outstanding Advances to
exceed the Revolving Credit Commitment;


 


(iii)                               no
debts have been cancelled, no claims or rights of substantial value have been
waived and no properties or assets (real, personal or mixed, tangible or
intangible) have been sold, transferred, or otherwise disposed of by the
Borrower or any Subsidiary except (A) dispositions of worn-out or obsolete
personal property, and (B) otherwise in the ordinary course of business
and consistent with past practice;


 


(iv)                              there
has been no change in any method of accounting or accounting practice utilized
by the Borrower or any Subsidiary;


 


(v)                                 no
material casualty, loss or damage has been suffered by the Borrower or any
Subsidiary, regardless of whether such casualty, loss or damage is or was
covered by insurance;


 


(vi)                              there
have been no announced changes in the policies or practices of any customer,
supplier or referral source which would reasonably be expected to have a
Material Adverse Effect;


 


(vii)                           there
has been no incurrence by the Company or any Subsidiary of (A) any
liability or obligation outside of the ordinary course of business, or (B) any
Indebtedness other than Permitted Indebtedness;


 


16

















 


(viii)                        there has
been no declaration, setting aside or payment of any dividend or distribution
or any other payment of any kind by the Borrower to or in respect of any equity
securities of the Borrower; and


 


(ix)                                No
action described in this Section 3.01(d) has been agreed to be taken
by the Borrower or any Subsidiary.


 


(e)                                  The
Borrower and its Subsidiaries have in place adequate systems of internal
controls and disclosure controls and procedures sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in accordance with
GAAP and Regulation S-X and to maintain asset accountability, (iii) access
to assets is permitted only in accordance with management’s general or specific
authorization, (iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences, and (v) the Borrower and its
management are able to obtain timely and accurate information regarding the
Business Operations and all material transactions relating to the Borrower and
the Subsidiaries; and no material deficiency exists with respect to the
Borrower’s or any Subsidiary’s systems of internal controls.


 


(f)                                    All
of the SEC Reports, as of the respective dates thereof, complied in all
material respects, as applicable, with the Act and the Exchange Act.


 


Section 3.02.  Organization; Corporate Existence.


 


(a)                                  The
Borrower (i) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, (ii) has all requisite
corporate power and authority to own its properties and to carry on its
business as now conducted and as proposed hereafter to be conducted, (iii) is
qualified to do business as a foreign corporation in each jurisdiction
(including, without limitation, the State of Texas) in which the failure of the
Borrower to be so qualified would have a Material Adverse Effect, and (iv) has
all requisite corporate power and authority to execute and deliver, and perform
all of its obligations under, the Loan Documents.  True and complete copies of the Organic
Documents of the Borrower, together with all amendments thereto, have been
furnished to the Lender.


 


(b)                                 On
the date of this Agreement, the outstanding capital stock of the Company, and
the number and amount of all outstanding options, warrants, convertible
securities, subscriptions and other rights to acquire capital stock of the
Company, are as set forth in Schedule 3.02 of the Disclosure Schedule.


 


(c)                                  Schedule
3.02 of the Disclosure Schedule further sets forth, with respect to each
Active Subsidiary on the date of this Agreement, (i) its proper legal
name, (ii) its jurisdiction of incorporation or formation, (iii) the
jurisdictions in which it is qualified to do business as a foreign entity, (iv) the
number of shares of capital stock or ownership interests outstanding, and (v) the
owner of such outstanding capital stock or other ownership interests.  Each of the Active Subsidiaries (A) is an
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or formation, (B) has all requisite
power and authority to own its properties and to carry on its business as now
conducted and as 


 


17

















 


proposed hereafter to be conducted, and to execute and deliver, and
perform all of its obligations under, the Loan Documents to which it is a
party, and (C) is not required to be qualified to do business as a foreign
entity in any jurisdiction in which it is not so qualified and the failure to
be so qualified would reasonably be expected to have a Material Adverse
Effect.  True and complete copies of the
Organic Documents of each Active Subsidiary, together with all amendments
thereto to the date hereof, have been furnished to the Lender.


 


(d)                                 On
the date of this Agreement, the Borrower has no Subsidiaries other than the
Active Subsidiaries and the Dissolving Subsidiaries.  Each of the Dissolving Subsidiaries (i) has
no material assets or liabilities, (ii) is not engaged in the conduct of
any active business operations, and (iii) is actively pursuing its
dissolution as a legal entity.


 


Section 3.03.  Authorization.


 


(a)                                  The
execution, delivery and performance by the Borrower and the Subsidiaries of
their respective obligations under the Loan Documents have been duly authorized
by all requisite corporate, company, partnership and other action and will not,
either prior to or as a result of the consummation of the transactions
contemplated by this Agreement: (i) violate any provision of Applicable
Law, any order of any court or other agency of government, any provision of the
Organic Documents of the Borrower or any Subsidiary, or any Contract,
indenture, agreement or other instrument to which the Borrower or any of the
Subsidiaries is a party, or by which the Borrower or any of the Subsidiaries or
any of its assets or properties are bound, or (ii) be in conflict with,
result in a breach of, or constitute (after the giving of notice or lapse of
time or both) a default under, or, except as may be provided in the Loan
Documents, result in the creation or imposition of any Lien of any nature
whatsoever upon any of the property or assets of the Borrower or any of the Subsidiaries
pursuant to, any such Contract, indenture, agreement or other instrument.  When executed and delivered, each Loan
Document to which the Borrower or any Subsidiary is a party will constitute the
valid and binding obligation of the Borrower or such Subsidiary (as
applicable), enforceable against the Borrower or such Subsidiary in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors’ rights generally,
and by general principles of equity.


 


(b)                                 Neither
the Borrower nor any of the Subsidiaries is required to obtain any Government
Approval, consent or authorization from, or to file any declaration or
statement with, any governmental instrumentality or agency in connection with
or as a condition to the execution, delivery or performance of any of the Loan
Documents.


 


Section 3.04.  Litigation.  Except as disclosed on Schedule 3.04
of the Disclosure Schedule, there is no action, suit or proceeding at law or in
equity or by or before any governmental instrumentality or other agency now
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or any of the Subsidiaries or any of their respective assets,
which, if adversely determined, would have a Material Adverse Effect.  The Borrower has no Knowledge of any state of
facts, events, conditions or circumstances which would properly constitute
grounds for or the basis of any meritorious suit, action, arbitration,
proceeding or investigation (including, without limitation, any unfair labor
practice charges, interference with union organizing activities, or other labor
or employment claims) against or 


 


18

















 


with respect to the Borrower or any Subsidiary which, if adversely
determined, would have a Material Adverse Effect.


 


Section 3.05.  Material Contracts.  Except as disclosed on Schedule 3.05
of the Disclosure Schedule, neither the Borrower nor any of the Subsidiaries is
(a) a party to any Contract, agreement or instrument or subject to any
charter or other corporate or organizational restriction which has had or could
reasonably be expected to have a Material Adverse Effect, (b) a party to
any collective bargaining agreement, or (c) in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any Contract, agreement or instrument to which it is a party or by
which any of its assets or properties is bound, which default, individually or
in the aggregate, would have or could reasonably be expected to have a Material
Adverse Effect.


 


Section 3.06.  Title to Properties.  The Borrower and each of the Subsidiaries has
good title to all of its properties and assets, free and clear of all mortgages,
security interests, restrictions, encumbrances or other Liens of any kind,
except for restrictions on the nature of use thereof imposed by Applicable Law,
and except for Permitted Liens, none of which materially interfere with the use
and enjoyment of such properties and assets in the normal course of the
Business Operations as presently conducted, or materially impair the value of
such properties and assets for the purpose of such business.


 


Section 3.07.  Real Property.  Schedule 3.07 of the Disclosure
Schedule sets forth a correct and complete list of all Real Properties
currently leased or occupied by the Borrower and/or any of the
Subsidiaries.  Neither the Borrower nor
any of the Subsidiaries owns any Real Properties.  The Borrower and each Subsidiary has a valid
lessee’s interest in each Real Property currently leased or occupied by the
Borrower or such Subsidiary.  Neither the
Borrower, any Subsidiary, or, to the Borrower’s Knowledge, any other party
thereto, is in material breach or violation of any requirements of any such
lease; and such Real Properties are in good condition (reasonable wear and tear
excepted) and are adequate for the current and proposed businesses of the
Borrower and the Subsidiaries.


 


Section 3.08.  Machinery and Equipment.  The machinery and equipment owned and/or used
by the Borrower and the Subsidiaries is, as to each individual material item of
machinery and equipment, and in the aggregate as to all such equipment, in good
and usable condition and in a state of good maintenance and repair (reasonable
wear and tear excepted), and adequate for its use in the Business Operations.


 


Section 3.09.  Capitalization.  Except as set forth in Schedule 1.01
or Schedule 3.02 of the Disclosure Schedule and for new Subsidiaries
formed in accordance with Section 5.11 below, the Borrower does not,
directly or indirectly, own any capital stock of or any form of equity interest
in any other Person.


 


Section 3.10.  Solvency.  After giving effect to the Loans and the
other transactions contemplated hereby, the borrowings made and/or to be made
by the Borrower under this Agreement do not and will not render the Borrower
insolvent or with unreasonably small capital for its business; the fair
saleable value of all of the assets and properties of the Borrower does now,
and will, upon the funding of the Loans contemplated hereby, exceed the
aggregate liabilities and Indebtedness of the Borrower (including contingent
liabilities); the Borrower is not 


 


19

















 


contemplating either the filing of a petition under any state or
federal bankruptcy or insolvency law, or the liquidation of all or any
substantial portion of its assets or property; the Borrower has no knowledge of
any Person contemplating the filing of any such petition against the Borrower;
and the Borrower reasonably anticipates that it will be able to pay its debts
as they mature.


 


Section 3.11.  No Investment Company.  The Borrower is not an “investment company”
or a company “controlled” by an “investment company” as such terms are defined
in the Investment Company Act of 1940, as amended.


 


Section 3.12.  Margin Securities.  The Borrower does not own or have any present
intention of acquiring any “margin security” or any “margin stock” within the
meaning of Regulations T, U or X of the Board of Governors of the Federal
Reserve System (herein called “margin security” and “margin stock”).  None of the proceeds of the Loans will be
used, directly or indirectly, for the purpose of purchasing or carrying, or for
the purpose of reducing or retiring any Indebtedness which was originally
incurred to purchase or carry, any margin security or margin stock or for any
other purpose which might constitute the transactions contemplated hereby a “purpose
credit” within the meaning of said Regulations T, U or X, or cause this
Agreement to violate any other regulation of the Board of Governors of the
Federal Reserve System or the Exchange Act, or any rules or regulations
promulgated under such statutes.


 


Section 3.13.
 Taxes.


 


(a)                                  All
federal, state and local tax returns and tax reports required to be filed by
the Borrower and/or any Subsidiary have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such returns and reports
are required to be filed.  All federal,
state and local income, franchise, sales, use, property, excise, ad valorem,
value-added, payroll and other taxes (including interest, penalties and
additions to tax and including estimated tax installments where required to be
filed and paid) due from or with respect to the Borrower and the Subsidiaries
have been paid to the extent due and payable, and appropriate accruals have
been made on the Borrower’s books for taxes not yet due and payable.  All taxes and other assessments and levies
which the Borrower and/or any Subsidiary is required by law to withhold or to
collect have been duly withheld and collected, and have been paid over to the
proper governmental authorities to the extent due and payable.  Except as set forth in Schedule 3.13
of the Disclosure Schedule, there are no outstanding or pending material
claims, deficiencies or assessments for taxes, interest or penalties with
respect to any taxable period of the Borrower or any Subsidiary, and no
outstanding tax Liens.


 


(b)                                 Except
as disclosed in Schedule 3.13 of the Disclosure Schedule, the Borrower
has no Knowledge and has not received notice of any pending audit with respect
to any federal, state or local tax returns of the Borrower or any Subsidiary,
and no waivers of statutes of limitations have been given or requested with
respect to any tax years or tax filings of the Borrower or any Subsidiary.


 


Section 3.14.  ERISA.  Except as set forth in Schedule 3.14
of the Disclosure Schedule, neither the Borrower nor any ERISA Affiliate of the
Borrower maintains or has any obligation to make any contributions to any
pension, profit sharing or other similar plan providing for deferred
compensation to any employee.  With
respect to any such plan(s) as may now exist or may hereafter be
established by the Borrower or any ERISA Affiliate of the Borrower, and which 


 


20

















 


constitutes an “employee pension benefit plan” within the meaning of Section 3(2) of
ERISA, except as set forth on Schedule 3.14 of the Disclosure
Schedule:  (a) the Borrower or the
subject ERISA Affiliate has paid and shall cause to be paid when due all
amounts necessary to fund such plan(s) in accordance with its terms, (b) except
for normal premiums payable by the Borrower to the Pension Benefit Guaranty
Corporation (“PBGC”), the Borrower or the subject ERISA Affiliate has
not taken and shall not take any action which could result in any liability to
the PBGC, or any of its successors or assigns, (c) the present value of
all accrued benefits thereunder shall not at any time exceed the value of the
assets of such plan(s) allocable to such accrued benefits, (d) there
have not been and there shall not be any transactions such as would cause the
imposition of any tax or penalty under Section 4975 of the Code or under Section 502
of ERISA, which would adversely affect the funded benefits attributable to the
Borrower or the subject ERISA Affiliate, (e) there has not been and there
shall not be any termination or partial termination thereof (other than a
partial termination resulting solely from a reduction in the number of
employees of the Borrower or an ERISA Affiliate of the Borrower, which
reduction is not anticipated by the Borrower), and there has not been and there
shall not be any “reportable event” (as such term is defined in Section 4043(b) of
ERISA) on or after the effective date of Section 4043(b) of ERISA
with respect to any such plan(s) subject to Title IV of ERISA, (f) no
“accumulated funding deficiency” (as defined in Section 412 of the Code)
has been or shall be incurred on or after the effective date of Section 412
of the Code, (g) such plan(s) have been and shall be determined to be
“qualified” within the meaning of Section 401(a) of the Code, and
have been and shall be duly administered in compliance with ERISA and the Code,
and (h) the Borrower is not aware of any fact, event, condition or cause
which might adversely affect the qualified status thereof.  As respects any “multi-employer plan” (as
such term is defined in Section 3(37) of ERISA) to which the Borrower or
any ERISA Affiliate thereof has heretofore been, is now, or may hereafter be
required to make contributions, the Borrower or such ERISA Affiliate has made
and shall make all required contributions thereto, and there has not been and
shall not be any “complete withdrawal” or “partial withdrawal” (as such terms
are respectively defined in Sections 4203 and 4205 of ERISA) therefrom on the
part of the Borrower or such ERISA Affiliate.


 


Section 3.15.  Intellectual Property.  The Borrower and the Subsidiaries own or have
the valid right to use all material patents, trademarks, copyrights, software,
computer programs, equipment designs, network designs, equipment
configurations, technology and other intellectual property used, marketed and
sold in the Business Operations, and the Borrower and the Subsidiaries are in
compliance in all material respects with all licenses, user agreements and
other such agreements regarding the use of intellectual property used in the
Business Operations; and the Borrower has no Knowledge that or received notice
claiming that any of such intellectual property infringes upon or violates the
rights of any other Person.


 


Section 3.16.  Compliance with Laws.  The Borrower and the Subsidiaries are in
compliance with all occupational safety, health, wage and hour, employment
discrimination, environmental, flammability, labeling and other Applicable Law
(including, without limitation, healthcare laws and regulations, and healthcare
reimbursement laws and regulations) which are material to the Business
Operations, except where such non-compliance would not, individually or in the
aggregate, have a Material Adverse Effect. 
To the Borrower’s Knowledge, there are no state or facts, events,
conditions or occurrences which may now or hereafter constitute or result in a
violation of any Applicable Law, or which may give rise to the assertion of any
such 


 


21

















 


violation, which could have a Material Adverse Effect.  Neither the Borrower nor any Subsidiary has
received written notice of default or violation, nor is the Borrower or any
Subsidiary in default or violation, with respect to any judgment, order, writ,
injunction, decree, demand or assessment issued by any court or any federal,
state, local, municipal or other governmental agency, board, commission,
bureau, instrumentality or department, domestic or foreign, relating to any
aspect of the Borrower’s or any Subsidiaries’ business, affairs, properties or
assets, which default(s) or violation(s) would, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.  Neither the Borrower nor any Subsidiary has
received written notice of or been charged with, or is, to the Borrower’s
Knowledge, under investigation with respect to, any violation(s) of any
provision of any Applicable Law, which violation(s) would, individually or
in the aggregate, have a Material Adverse Effect.


 


Section 3.17.  Licenses and Permits.  The Borrower and each Subsidiary has all
federal, state and local licenses and permits required to be maintained in
connection with the Business Operations, except where the failure to maintain
any such license or permit would not, individually or in the aggregate, have a
Material Adverse Effect; and all such licenses and permits are valid and in
full force and effect.  The Borrower and
each Subsidiary has complied with the requirements of such licenses and permits
in all material respects, and has received no notice of any pending or
threatened proceedings for the suspension, termination, revocation or
limitation thereof. There is no circumstance or condition Known to the Borrower
that would cause or permit any of such licenses or permits to be voided, revoked
or withdrawn.


 


Section 3.18.  Insurance.  Schedule 3.18 of the Disclosure
Schedule lists all insurance coverages maintained by the Borrower and the
Subsidiaries, including the names of insurers, policy limits and
deductibles.  Neither the Borrower nor
any Subsidiary has received written notice of cancellation or intent not to
renew any of such policies, and to the Borrower’s Knowledge, there has not
occurred, and there does not exist, any condition (other than general
industry-wide conditions) such as would cause any of such insurers to cancel
any of such insurance coverages, or would be reasonably likely to materially
increase the premiums charged to the Company and the Subsidiaries for coverages
consistent with the scope and amounts of coverages as in effect on the date of
this Agreement.


 


Section 3.19.  Environmental Laws.


 


(a)                                  The
Borrower and each Subsidiary has complied with all Environmental Laws relating
to its business and properties, except where non-compliance would not,
individually or in the aggregate, have a Material Adverse Effect; and to the
Borrower’s Knowledge, there exist no Hazardous Substances in amounts in
violation of applicable Environmental Laws on any of the Real Properties the
existence of which would have a Material Adverse Effect, except those that are
stored and used in compliance with Applicable Laws.


 


(b)                                 Neither
the Borrower nor any Subsidiary has received notice of any pending or
threatened litigation or administrative proceeding which in any instance (i) asserts
or alleges any violation of applicable Environmental Laws on the part of the
Borrower or any Subsidiary, (ii) asserts or alleges that the Borrower or
any Subsidiary is required to clean up, remove or otherwise take remedial or
other response action due to the disposal, depositing, discharge, leaking or
other release of any Hazardous Substances or materials, or (iii) asserts
or alleges that the Borrower or any Subsidiary is required to pay all or any
portion of the costs of 


 


22

















 


any past, present or future cleanup, removal or remedial or other
response action which arises out of or is related to the disposal, depositing,
discharge, leaking or other release of any hazardous substances or materials by
the Borrower or any Subsidiary.  To the
Borrower’s Knowledge, neither the Borrower nor any Subsidiary is subject to any
judgment, decree, order or citation related to or arising out of any
Environmental Laws.  To the Borrower’s
Knowledge, neither the Borrower nor any Subsidiary has been named or listed as
a potentially responsible party by any governmental body or agency in any
matter arising under any Environmental Laws. 
Neither the Borrower nor any Subsidiary is a participant in, nor does
the Borrower have Knowledge of, any governmental investigation involving any of
the Real Properties.


 


(c)                                  Neither
the Borrower or any Subsidiary nor, to the Borrower’s Knowledge, any other
person, firm, corporation or governmental entity has caused or permitted any
Hazardous Substances or other materials to be stored, deposited, treated,
recycled or disposed of on or at any of the Real Properties which materials, if
known to be present, would reasonably be expected to require or authorize
cleanup, removal or other remedial action under any applicable Environmental
Laws.


 


(d)                                 As
used in this Section 3.19 and in Section 5.08 below, the following
terms have the following meanings:


 


“Environmental
Laws” include all federal, state, and local laws, rules, regulations,
ordinances, permits, orders, and consent decrees agreed to by the Borrower or
any Subsidiary, relating to health, safety, and environmental matters
applicable to the business and property of the Borrower or any Subsidiary.  Such laws and regulations include but are not
limited to the Resource Conservation and Recovery Act (“RCRA”), 42
U.S.C. §6901 et seq., as amended; the Comprehensive Environmental Response,
Compensation and Liability Act (“CERCLA”), 42 U.S.C. §9601 et seq., as
amended; the Toxic Substances Control Act (“TSCA”), 15 U.S.C. §2601 et
seq., as amended; and the Clean Water Act, 33 U.S.C. §1331 et seq., as amended.


 


“Hazardous
Substances”, “Release”, “Respond” and “Response” shall
have the meanings assigned to them in CERCLA, 42 U.S.C. §9601, as amended.


 


“Notice”
means any actual summons, citation, directive, information request, notice of
potential responsibility, notice of violation or deficiency, order, claim,
complaint, investigation, proceeding, judgment, letter, or other written
communication from the United States Environmental Protection Agency or other
federal, state, or local agency or authority, or any other entity or
individual, public or private, concerning any intentional or unintentional act
or omission which involves management of Hazardous Substances in amounts in
violation of Environmental Laws on or transported off any Real Properties; the
imposition of any liens asserted by government entities in connection with any
Borrower’s or Subsidiary’s response to the presence or Release of Hazardous
Substances in amounts in violation of Environmental Laws; and any alleged
violation of or responsibility under any Environmental Laws.


 


Section 3.20.  Sensitive
Payments. 
Neither the Borrower nor any Subsidiary has (a) made any
contributions, payments or gifts to or for the private use of any governmental
official, employee or agent where either the payment or the purpose of such
contribution, payment or gift is illegal under the laws of the United States or
the jurisdiction in which made, (b) established or maintained any unrecorded
fund or asset for any purpose or made any false or artificial entries on 


 


23

















 


its books, (c) made any payments to any person with the intention
that any part of such payment was to be used for any purpose other than that
described in the documents supporting the payment, or (d) done business
with or proposes to do business with any country, or any Person in any country,
which is prohibited or restricted under any Applicable Law of the United
States, or engaged in or proposes to engage in any “trading with the enemy” or
other transactions violating any rules or regulations of the Office of
Foreign Assets Control or any similar laws, rules or regulations of any
federal, state, local or foreign government or governmental agency.


 


Section 3.21.  Full Disclosure.  No statement of fact made by the Borrower in
this Agreement or any other Loan Document, in any SEC Report, or in any
information memorandum, business summary, agreement, certificate, schedule or
other written statement furnished by the Borrower to the Lender pursuant
hereto, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact necessary to make any statements
contained herein or therein not misleading, in any manner or instance in which
the correction of such statement would indicate, result in or reflect a
Material Adverse Effect relative to the represented facts.  Except for matters of a general economic or
political nature which do not affect the Borrower or any Subsidiary uniquely,
there is no fact presently known to the Borrower or any Subsidiary which has
not been disclosed to the Lender, which has had or would reasonably be expected
to have a Material Adverse Effect.


 


Section 3.22.  Revolving Loan Agreement.  All representations and warranties made by
the Borrower in the Revolving Loan Agreement are true and correct in all
respects on and as of the Closing Date.


 


IV.                               CONDITIONS
TO CLOSING


 


The obligation
of the Lender to make the incremental additional Tranche B Term Loan hereunder,
sell the Original Warrant hereunder, and consummate the other transactions
contemplated hereby are subject to the following conditions precedent:


 


Section 4.01.  Representations and Warranties.  The representations and warranties set forth
in Article III hereof and in the other Loan Documents shall be true and
correct on and as of the Closing Date.


 


Section 4.02.  Loan Documents.  The Borrower and the Active Subsidiaries (as
applicable) shall have duly executed and/or delivered to the Lender all of the
following:


 


(a)                                  The
Notes;


 


(b)                                 The
Warrant;


 


(c)                                  The
Registration Rights Agreement;


 


(d)                                 A
certificate of the Secretary or an Assistant Secretary of the Borrower,
certifying the vote of the Board of Directors of the Borrower authorizing and
directing the execution and delivery of this Agreement and the other Loan
Documents to be executed and delivered by the Borrower hereunder, the Revolving
Loan Agreement and/or related promissory 


 


24

















 


notes, security agreements and other documents, and all further
agreements, instruments, certificates and other documents pursuant hereto and
thereto;


 


(e)                                  A
certificate of the Secretary of State of the State of Delaware, dated reasonably
prior to the Closing Date, stating that the Borrower is duly formed and in good
standing in such jurisdiction; and


 


(f)                                    Such
other agreements, instruments, documents and certificates (including, without
limitation, satisfactory lien and judgment searches respecting the Borrower and
the Subsidiaries) as the Lender or its counsel may reasonably request.


 


Section 4.03.  Repayment of Revolving Credit Advances.  The Borrower shall have executed and
delivered the Revolving Loan Agreement and all related promissory notes,
security agreements and other documents required thereunder (all of which shall
be in form and substance reasonably satisfactory to the Lender), and shall have
repaid to the Lender, out of the initial advances made under the Revolving Loan
Agreement, all Advances (as such term is defined in the Original Agreement) and
all unpaid accrued interest thereon and Monitoring Fees (as such term is
defined in the original Agreement) to the Closing Date.


 


Section 4.04.  Equity Contribution.  Subsequent to June 1, 2008, the Borrower
shall have received (and provided evidence thereof satisfactory to the Lender)
net equity proceeds in an amount not less than $1,000,000 from the issuance and
sale of Common Stock on terms and conditions satisfactory to the Lender.


 


Section 4.05.  Fees and Reimbursements.  The Borrower shall have paid the Closing
Fees, and shall have paid or reimbursed the Lender for its reasonable
out-of-pocket costs, charges and expenses incurred to the Closing Date in
connection with the transactions contemplated by this Agreement.


 


Section 4.06.  Further Matters.  All legal matters, and the form and substance
of all documents, incident to the transactions contemplated hereby shall be
satisfactory to counsel for the Lender.


 


Section 4.07.
 No Default.  No Default or Event of Default shall have
occurred and be continuing.


 


V.                                   AFFIRMATIVE
COVENANTS


 


The Borrower
hereby covenants and agrees that, from the date hereof and until all
Obligations (whether now existing or hereafter arising) have been paid in full,
unless the Lender shall otherwise consent in writing, the Borrower shall, and
shall cause each of its Subsidiaries to:


 


Section 5.01.  Corporate and Insurance.  Do or cause to be done all things necessary
to at all times (a) preserve, renew and keep in full force and effect its
corporate or other legal existence, rights, licenses, permits and franchises
(except that the Dissolving Subsidiaries shall continue diligently to pursue
and complete their dissolution), (b) comply with the Loan Documents and
any other agreements and instruments executed and delivered hereunder and
thereunder (to the extent a party thereto), (c) maintain, preserve and
protect all of its franchises 


 


25

















 


and material trade names, and preserve all of its material property
used or useful in the conduct of its business and keep the same in good repair,
working order and condition (reasonable wear and tear excepted), and from time
to time make, or cause to be made, all needed and proper repairs, renewals,
replacements, betterments and improvements thereto, so that the Business
Operations carried on in connection therewith may be properly and
advantageously conducted at all times, (d) maintain insurance in amounts,
on such terms and against such risks (including fire and other hazards insured
against by extended coverage, public liability insurance covering claims for
personal injury, death or property damage, and professional liability
insurance) as are customary for companies of similar size in the same or
similar businesses and operating in the same or similar locations, as well as
all such other insurance as is required by the Collateral Agreement, each of
which policies (other than workers compensation) shall be issued by a financially
sound and reputable insurer reasonably satisfactory to the Lender and shall
name the Lender as loss payee and additional insured as its interest appears
and provide for the Lender to receive written notice thereof at least thirty
(30) days prior to any cancellation of the subject policy, and (e) comply
in all material respects with all material Contracts and material obligations
to which it is a party or by which it is bound, all benefit plans which it
maintains or is required to contribute to, and all Applicable Law (including,
without limitation, Environmental Laws, healthcare laws and regulations and
healthcare reimbursement laws and regulations) material to its Business
Operations, and all requirements of its insurers, whether now in effect or
hereafter enacted, promulgated or issued. 
The Borrower will provide to the Lender a certificate of the foregoing
insurance, promptly upon request.


 


Section 5.02.  Payment of Taxes.  File, pay and discharge, or cause to be paid
and discharged, all material taxes, assessments and governmental charges or
levies imposed upon the Borrower and/or any Subsidiary or upon its income and
profits or upon any of its property (real, personal or mixed) or upon any part
thereof, before the same shall become in default, as well as all lawful claims
for labor, materials, supplies and otherwise, which, if unpaid when due, might
become a Lien or charge upon such property or any part thereof; provided,
however, that neither the Borrower nor any Subsidiary shall be required
to pay and discharge or cause to be paid and discharged any such tax,
assessment, charge, levy or claim so long as (a) the validity thereof
shall be contested in good faith by appropriate proceedings and the Borrower or
such Subsidiary shall have set aside on its books adequate reserves with
respect to any such tax, assessment, charge, levy or claim so contested, and (b) payment
with respect to any such tax, assessment, charge, levy or claim shall be made
before any of the Borrower’s or such Subsidiary’s property shall be seized or
sold in satisfaction thereof.


 


Section 5.03.  Notices.  Give prompt written notice to the Lender of (a) the
filing by the Borrower of any SEC Reports, (b) any proceedings instituted
against the Borrower or any Subsidiary in any federal or state court or before
any commission or other regulatory body, whether federal, state or local,
which, if adversely determined, could reasonably be expected to have a Material
Adverse Effect, and (c) the occurrence of any material casualty to any Collateral,
any Material Adverse Effect, or any Default (if the Borrower knows or
reasonably should know of the existence thereof) or Event of Default, and the
action that the Borrower has taken, is taking, or proposes to take with respect
thereto.


 


26
















 


Section 5.04.  Periodic
Reports. 
Furnish to the Lender:


 


(a)                                  Within
ninety (90) calendar days after the end of each Fiscal Year, consolidated
balance sheets, and consolidated and consolidating statements of income,
statements of stockholders’ equity, and statements of cash flows of the
Borrower and its Subsidiaries, together with footnotes and supporting schedules
thereto, certified (as to the consolidated statements) by independent certified
public accountants selected by the Borrower and reasonably satisfactory to the
Lender, showing the financial condition of the Borrower and its Subsidiaries at
the close of such Fiscal Year and the results of operations of the Borrower and
its Subsidiaries during such Fiscal Year;


 


(b)                                 Within
thirty (30) calendar days after the end of each calendar month (forty-five (45)
calendar days in the case of the end of a fiscal quarter), consolidated (and,
if specifically requested by the Lender reasonably in advance, but not more
frequently than quarterly, consolidating) unaudited balance sheets, statements
of income and statements of cash flows of the Borrower and its Subsidiaries,
together with supporting schedules thereto, prepared by the Borrower and
certified by the Borrower’s Chairman, President, Chief Executive Officer, Chief
Financial Officer or Chief Accounting Officer, such balance sheets to be as of
the close of such calendar month and such statements of income and statements
of cash flows to be for the period from the beginning of the then-current
Fiscal Year to the end of such calendar month, together with comparative
statements of income and cash flows for the corresponding period in the
immediately preceding Fiscal Year, in each case subject to normal audit and
year-end adjustments;


 


(c)                                  Concurrently
with the delivery of each of the financial statements required by Sections 5.04(a) and
5.04(b) above, a certificate on behalf of the Borrower (signed by the
Chairman, President, Chief Executive Officer, Chief Financial Officer or Chief
Accounting Officer of the Borrower), certifying that he has examined the
provisions of this Agreement and that no Default or Event of Default has
occurred and/or is continuing;


 


(d)                                 Within
fifteen (15) calendar days after the end of each calendar month, an accounts
receivable aging report and an accounts payable aging report for the Borrower
and the Subsidiaries (each on a consolidated and consolidating basis);


 


(e)                                  As
soon as approved by the Borrower’s Board of Directors (but in any event not
later than the beginning of each Fiscal Year), a budget and operating plan (on
a month-by-month basis) for such Fiscal Year, in such detail as may reasonably
be required by the Lender;


 


(f)                                    As
and when distributed to the Borrower’s stockholders, copies of all proxy
materials, reports and other information which the Borrower provides to its
stockholders in their capacity as such; and as and when distributed to any
other holders of Indebtedness of the Borrower or the Subsidiaries (including,
without limitation, the holders of the Indebtedness under the Revolving Loan
Agreement), copies of all reports, statements and other information provided in
writing to such lenders; and


 


(g)                                 Promptly,
from time to time, such other information regarding the Borrower’s or any
Subsidiary’s operations, assets, business, affairs and financial condition, as
the Lender may reasonably request.


 


27

















 


To the extent
that the financial statements required by Sections 5.04(a) and 5.04(b) are
contained in any SEC Reports filed by the Borrower within the required time
period for the delivery of such financial statements, then the Borrower shall
be deemed to have complied with the subject financial statement delivery by
notifying the Lender of the filing of the subject SEC Report.


 


In the event
that, subsequent to the completion of the presently planned deregistration of
the Common Stock under the Exchange Act, the Borrower has any class of equity
securities registered under the Exchange Act, then, to the extent that any
report or other delivery required under this Section 5.04 or elsewhere in
this Agreement will, at the time of anticipated delivery to the Lender, contain
any material non-public information, the Borrower will notify the Lender
thereof as promptly as practicable prior to the delivery of such report (but
without disclosing the specific items of material non-public information or the
nature thereof), and if so requested by the Lender prior to the required date
of the information delivery hereunder, the Borrower shall (x) if reasonably
practicable, redact such material non-public information from the subject
report prior to the delivery thereof to the Lender, or (y) defer delivery
of such report until such time as the Borrower has made public disclosure of
the subject material information or the Lender has affirmatively requested
delivery of such report.  Absent timely
request by the Lender as aforesaid, the Borrower shall make the required
delivery to the Lender on a timely basis.


 


Section 5.05.  Books and Records; Inspection.  Maintain centralized books and records
regarding all of the Business Operations at the Borrower’s principal place of
business, and permit agents or representatives of the Lender at reasonable
intervals to inspect, at any time during normal business hours, upon reasonable
notice, and without undue material disruption of the Business Operations, all
of the Borrower’s and its Subsidiaries’ various facilities, books and records
(wherever located), to make copies, abstracts and/or reproductions thereof, and
to discuss the business and affairs of the Borrower and the Subsidiaries with
the management of the Borrower; and without limitation of the foregoing, the
Lender may engage an independent auditing firm to conduct an audit of the
Collateral and the Borrower’s books and records on an annual basis.


 


Section 5.06.  Accounting.  Maintain a standard system of accounting in
order to permit the preparation of financial statements in accordance with
GAAP.


 


Section 5.07.  Reimbursements.  Pay or reimburse the Lender or other
appropriate Persons on demand for all reasonable costs, expenses and other
charges incurred or payable from time to time in connection with the
transactions contemplated by this Agreement, any waivers or amendments in
respect of any Loan Documents, any “workout” or enforcement action, and any
bankruptcy or insolvency proceedings relating to the Borrower or any
Subsidiary, including but not limited to any and all search fees, recording
fees, costs of inspections and legal and accounting fees; provided that,
except for any such audit conducted during the continuance of an Event of
Default, the Borrower shall not be obligated to pay or reimburse the Lender for
the cost of more than one audit performed by an independent auditing firm (as
contemplated by Section 5.05 above) in any twelve (12) month period.


 


Section 5.08.  Environmental Response.  In the event of any material discharge,
spill, injection, escape, emission, disposal, leak or other Release of
Hazardous Substances in amounts in violation of applicable Environmental Laws
by the Borrower or any Subsidiary on any Real Property owned or leased by the
Borrower or any Subsidiary, which is not authorized by a permit 


 


28

















 


or other approval issued by the appropriate governmental agencies and
which requires notification to or the filing of any report with any federal or
state governmental agency, the Borrower shall promptly: (a) notify the
Lender; and (b) comply with the notice requirements of the Environmental
Protection Agency and applicable state agencies, and take all steps necessary
to promptly clean up such discharge, spill, injection, escape, emission,
disposal, leak or other Release in accordance with all applicable Environmental
Laws and the Federal National Contingency Plan, and, if required by Applicable
Law, receive a certification from all applicable state agencies or the
Environmental Protection Agency, that such Real Property has been cleaned up to
the satisfaction of such agency(ies).


 


Section 5.09.  Management.  Cause James B Kaiser to continue to be
employed or to function as the chief executive officer of the Borrower, and
James J. TerBeest to be employed or to function as the chief financial officer
of the Borrower, unless a successor is appointed within sixty (60) days after
the termination of such individual’s employment, and such successor is
reasonably satisfactory to the Lender.


 


Section 5.10.  Use of Proceeds.  Cause all proceeds of the Loans to be
utilized solely in the manner and for the purposes set forth in Section 2.04
hereof.


 


Section 5.11.  Future Subsidiaries.  At any time and from time to time when the
Borrower or any of its Subsidiaries proposes to form or acquire any Subsidiary
subsequent to the Closing Date, or in the event that and at such time as any of
the Dissolving Subsidiaries shall have or hold any material assets or shall
engage in active business operations, the Borrower shall give written notice
thereof to the Lender reasonably in advance of the formation or acquisition of
such Subsidiary or such change of status of a Dissolving Subsidiary, providing
information therefor of the type called for in Schedule 3.02 of the
Disclosure Schedule; and contemporaneously with the formation or acquisition of
such new Subsidiary or such change of status of a Dissolving Subsidiary, the
Borrower shall cause such new Subsidiary or affected Dissolving Subsidiary to
execute and deliver (a) a guaranty agreement in substantially the form of
the Guaranty Agreement (or a joinder agreement with respect to the existing
Guaranty Agreement in form and substance reasonably satisfactory to the
Lender), and (b) a Collateral Agreement (with completed perfection
certificate and other appropriate Security Documents) in substantially the form
of the Collateral Agreement as currently in place (or a joinder agreement with
respect to the existing Collateral Agreement in form and substance reasonably
satisfactory to the Lender) and other Security Documents as reasonably
requested by the Lender.  Nothing contained
in this Section 5.11 shall be deemed to constitute any waiver by the
Lender of any consent otherwise required under this Agreement or any other Loan
Document with respect to the formation or acquisition of any Subsidiary or any
change in status of a Dissolving Subsidiary.


 


Section 5.12.  Landlord Waivers.  To the extent reasonably requested by the
Lender from time to time subsequent to the Closing Date, use commercially
reasonable efforts to obtain, within thirty (30) days after the Lender’s
request therefor, in form and substance reasonably satisfactory to the Lender,
any and all bailee waivers, warehousemen’s waivers, Landlord Waivers and/or
access agreements requested by the Lender in respect of locations where there
is stored or held any material books or records, or any other Collateral having
an aggregate fair market value in excess of $25,000 (including, without
limitation, existing offices in Dallas, Texas).


 


29

















 


VI.                               NEGATIVE
COVENANTS


 


The Borrower hereby
covenants and agrees that, until all Obligations (whether now existing or
hereafter arising) have been paid in full, unless the Lender shall otherwise
consent in writing, the Borrower shall not, and shall not permit any Subsidiary
to, directly or indirectly:


 


Section 6.01.  Indebtedness.  Incur, create, assume, become or be liable in
any manner with respect to, or permit to exist, any Indebtedness, other  than:


 


(a)                                  Indebtedness
to the Lender pursuant to the Loan Documents;


 


(b)                                 liabilities
with respect to trade obligations, accounts payable, or other similar payments,
operating leases and other normal accruals incurred in the ordinary course of
business, or with respect to which the Borrower or the subject Subsidiary is
contesting in good faith the amount or validity thereof by appropriate
proceedings, and then only to the extent that the Borrower or the subject
Subsidiary has set aside on its books adequate reserves therefor;


 


(c)                                  Indebtedness
existing on the date of this Agreement owed to those Persons, in those amounts
and having those maturities as set forth in Schedule 6.01 of the
Disclosure Schedule;


 


(d)                                 Capitalized
Leases reflected in the Financial Statements, and Capitalized Leases hereafter
entered into by the Borrower or its Subsidiaries in the ordinary course of the
Business Operations;


 


(e)                                  purchase
money Indebtedness incurred in connection with the Borrower’s or its
Subsidiaries’ acquisition of capital assets in the ordinary course of the
Business Operations;


 


(f)                                    Subordinated
Debt in such amounts and upon such terms and conditions as shall be acceptable
to the Lender in its sole and absolute discretion;


 


(g)                                 intercompany
Indebtedness between the Borrower and any Wholly-Owned Subsidiary or between
Wholly-Owned Subsidiaries;


 


(h)                                 Guarantees
to the extent permitted pursuant to Section 6.03 below; and


 


(i)                                     Indebtedness
under the Revolving Loan Agreement (subject to the limitations set forth in Section 6.12(b) below).


 


Section 6.02.  Liens.  Create, incur, assume or suffer to exist any
Lien or other encumbrance of any nature whatsoever on any of its assets, now or
hereafter owned, other than:


 


(a)                                  subject
to Section 5.02 above, Liens securing the payment of taxes which are
either not yet due or the validity of which is being contested in good faith by
appropriate proceedings, and as to which the Borrower or the subject Subsidiary
shall have set aside on its books adequate reserves;


 


(b)                                 deposits
under workers’ compensation, unemployment insurance and social security laws,
or to secure the performance of bids, tenders, contracts (other than for the 


 


30

















 


repayment of money borrowed) or leases, or to secure statutory
obligations or surety or appeal bonds, or to secure indemnity, performance or
other similar bonds in the ordinary course of business;


 


(c)                                  statutory
Liens of landlords and Liens imposed by law, such as, carriers’, warehousemen’s,
materialmen’s or mechanics’ liens, incurred by the Borrower or any Subsidiary
in good faith in the ordinary course of business and discharged promptly after
same are incurred; fully bonded Liens arising out of a judgment or award
against the Borrower or any Subsidiary with respect to which the Borrower or
such Subsidiary shall currently be prosecuting an appeal, a stay of execution
pending such appeal having been secured; and Liens arising out of a judgment or
award against the Borrower or any Subsidiary which are fully covered by
insurance (subject to applicable deductibles) and for which the relevant
insurer has not denied or disclaimed coverage;


 


(d)                                 other
Liens incurred in connection with Indebtedness expressly permitted pursuant to Section 6.01(d) and/or
Section 6.01(e) above, provided that such Liens do not extend to any
assets or property other than the specific assets or properties acquired
pursuant to such permitted Indebtedness;


 


(e)                                  encumbrances
consisting of easements, rights-of-way, survey exceptions and other similar
restrictions on the use of Real Property, or minor irregularities in title
thereto which do not materially impair the use of such property in the
operation of the business of the Borrower and its Subsidiaries (provided that
the placement by the owner of any leased Real Property of a mortgage or deed of
trust on the subject land and/or building shall not be deemed a Lien on the
leasehold interest of the Borrower or the subject Subsidiary);


 


(f)                                    Liens
in existence on the date of this Agreement, as set forth on Schedule 6.02
of the Disclosure Schedule;


 


(g)                                 Liens
arising out of judgments or awards (i) which are fully covered by
insurance (subject to applicable deductibles) and for which the relevant
insurer has not denied or disclaimed coverage, or (ii) with respect to
which the Borrower or the subject Subsidiary shall be prosecuting an appeal in
good faith and in respect of which a stay of execution shall have been issued;


 


(h)                                 Liens
in favor of the Lender;


 


(i)                                     Liens
under the Revolving Loan Agreement; and


 


(j)                                     extensions,
renewals or replacements of any Lien referred to in clauses (a) through (g) above,
provided that same shall not effect any increase in any principal amount
secured thereby.


 


Section 6.03.  Guarantees.  Guarantee, endorse or otherwise in any manner
become or be responsible for obligations of any other Person, except (a) endorsements
of negotiable instruments for collection in the ordinary course of business, (b) guarantees
by the Borrower of obligations of Wholly-Owned Subsidiaries (other than
Dissolving Subsidiaries) in the ordinary course of business, and (c) guarantees
by Wholly-Owned Subsidiaries (other than Dissolving Subsidiaries) of the
Borrower’s obligations under the Revolving Loan Agreement.


 


31

















 


Section 6.04.  Sales of Assets and Management.  (a) Sell, lease, transfer, encumber or
otherwise dispose of any of the Borrower’s or any Subsidiary’s properties,
assets, rights, licenses or franchises (including, without limitation, equity
interests in Subsidiaries) other than (i) sales of inventory in the
ordinary course of business, (ii) licenses, joint ventures and related
transactions entered into, modified or terminated in the ordinary course of
business, or (iii) the disposition of surplus or obsolete personal
properties in the ordinary course of business, or (b) permit any Affiliate
of the Borrower (other than a Domestic Subsidiary which is a party to the
Collateral Agreement) to own or obtain any patent, patent application,
copyright, copyright application, trademark, trademark application, license, or
other intangible asset relating to the Business Operations except in the normal
course of business on terms and conditions no less favorable to the Borrower or
any Subsidiary than those which could be obtained in an arms’ length
transaction with an unaffiliated third party.


 


Section 6.05.  Sale-Leaseback.  Enter into any arrangement with any Person
whereby the Borrower or any Subsidiary shall sell or transfer any property
(real, personal or mixed) used or useful in the Business Operations, whether
now owned or hereafter acquired, and thereafter rent or lease such property.


 


Section 6.06.  Investments; Acquisitions.  Make any Investment in, or otherwise acquire
or hold securities (including, without limitation, capital stock and evidences
of Indebtedness) of, or make loans or advances to, or enter into any
arrangement for the purpose of providing funds or credit to, any other Person
(including any Affiliate), except:


 


(a)                                  Investments
in Wholly-Owned Subsidiaries which have complied with the requirements of Section 5.11
hereof;


 


(b)                                 advances
(to the extent permitted by Applicable Law, including federal securities laws)
to employees of the Borrower or any Wholly-Owned Subsidiaries (other than
Dissolving Subsidiaries) for normal business expenses not to exceed at any time
$25,000 in the aggregate;


 


(c)                                  Investments
of excess cash generated in the Business Operations in Cash Equivalents; and


 


(d)                                 Investments
of cash in overnight deposits or other customary cash management Investments
with commercial banks or in commercial paper satisfying the criteria for such
banks or commercial paper as set forth in the definition of Cash Equivalents.


 


Section 6.07.  Real Property; Corporate Form; Acquisitions.  Acquire or hold any fee interest in any Real
Property; or dissolve or liquidate, or consolidate or merge with or into, sell
all or substantially all of the assets of the Borrower or any Subsidiary to, or
acquire all or substantially all of the securities, assets or properties of,
any other Person, except for (a) consolidations of a Subsidiary with a
Wholly-Owned Subsidiary (other than a Dissolving Subsidiary); (b) mergers
of a Wholly-Owned Subsidiary into the Borrower or into a Wholly-Owned
Subsidiary (other than a Dissolving Subsidiary); (c) sales to the Borrower
or another Subsidiary  for fair value; or
(d) the dissolution of the Dissolving Subsidiaries.


 


32

















 


Section 6.08.  Dividends and Redemptions.  Declare or pay any dividends, or make any
distribution of cash or property, or both, to any Person in respect of any of
the shares of the capital stock or other equity securities of the Borrower or
any other Person, or directly or indirectly redeem, purchase or otherwise
acquire for consideration any securities or shares of the capital stock or
other equity securities of the Borrower (other than payments not exceeding
$50,000 in the aggregate prior to September 30, 2008 for redemptions of
Common Stock as part of the Borrower’s contemplated “going private”
transaction) or any other Person; provided, that this Section 6.08
shall not be deemed to prohibit the payment of dividends or distributions by
any Subsidiary to the Borrower or to any other direct or indirect Wholly-Owned
Subsidiary.


 


Section 6.09.  Compensation.  Pay any compensation of any types or in any
amounts to any executive officers of the Borrower except (a) in accordance
with the employment agreements between the Borrower and such executive officers
as in effect on the Closing Date, (b) in accordance with the compensation
levels disclosed in Schedule 6.09 of the Disclosure Schedule, or (c) as
otherwise approved by the independent Compensation Committee of the Board of
Directors of the Borrower but in no case in any amount or amounts which would
cause or reasonably be expected to cause a Material Adverse Effect.


 


Section 6.10.  Change of Business.  (a) Engage in a business materially
different from the general nature of the Business Operations (i) as now
being conducted, or (ii) as the same may hereafter be reasonably expanded
from time to time in like areas of business; (b) cause or permit any of
the Dissolving Subsidiaries to own or hold any material assets or engage in any
active business operations; (c) wind up the Business Operations or cease
substantially all of its normal Business Operations for a period in excess of
ten (10) consecutive days; or (d) suffer any material disruption,
interruption or discontinuance of a material portion of its normal Business
Operations for a period in excess of ten (10) consecutive days; provided,
however, that the dissolution of the Dissolving Subsidiaries shall not
constitute a violation of this Section 6.10.


 


Section 6.11.  Receivables.  Sell or assign in any way any accounts
receivable, promissory notes or trade acceptances held by the Borrower or any
Subsidiary with or without recourse, except for (a) collateral assignment
thereof as security for the Borrower’s obligations under the Revolving Loan
Agreement, (b) collections (including endorsements) in the ordinary course
of business, and (c) transfers to or among the Borrower and Domestic
Subsidiaries which are party to the Guaranty Agreement and the Collateral
Agreement.


 


Section 6.12.  Certain Amendments.  Agree, consent, permit or otherwise undertake
to amend any of the terms or provisions of (a) the Borrower’s or any
Subsidiary’s Organic Documents in a manner which may impair in any respect any
of the Lender’s rights under any of the Loan Documents, and (b) the
Revolving Loan Agreement and/or any related promissory notes, security
agreements or other documents in any manner such as would increase the maximum
amount available to be borrowed thereunder, increase the interest rate
applicable to any such borrowings, extend then maturity date thereunder, or in
any other manner which would be materially adverse to the Lender’s rights as a
subordinated creditor (subordinate only to the obligations under the Revolving
Loan Agreement).


 


Section 6.13.  Affiliate Transactions.  Enter into any Contract, agreement or
transaction with any Affiliate of the Borrower except (a) as disclosed in Schedule
6.13 of the Disclosure Schedule, (b) for intercompany Indebtedness
between the Borrower and any Wholly-Owned 


 


33

















 


Subsidiary (other than a Dissolving Subsidiary) or between any
Wholly-Owned Subsidiaries (other than Dissolving Subsidiaries), or (c) in
the normal course of business on terms and conditions no less favorable to the
Borrower or any Subsidiary than those which could be obtained in an arms’
length transaction with an unaffiliated third party.


 


Section 6.14.  Fiscal Year.  Amend its Fiscal Year.


 


Section 6.15.  Subordinated Debt.  Prepay, redeem or purchase any Subordinated
Debt.


 


Section 6.16.  Capital Expenditures.  Make aggregate Capital Expenditures (whether
through cash purchase, principal payments under Capitalized Leases, or
otherwise), in the aggregate for the Borrower and all Subsidiaries, in excess
of $250,000 in any Fiscal Year.


 


Section 6.17.  Minimum EBITDA; Coverage Test.  Permit (a) EBITDA to be less than zero
(i.e., a negative number) for the six (6) month period from July 1,
2008 through December 31, 2008, or (b) the ratio of EBITDA to Fixed
Charges to be less than 1.00 to 1.00 for (i) the fiscal quarter ending March 31,
2009, (ii) the six (6) month period from January 1, 2009 through
June 30, 2009, (iii) the nine (9) month period from January 1,
2009 through September 30, 2009, or (iv) any four (4) consecutive
fiscal quarters ending on or after December 31, 2009.


 


Section 6.18.  ERISA.  Suffer or permit any condition or
circumstance contrary to or in violation of Section 3.14 above.


 


VII.                          DEFAULTS


 


Section 7.01.  Events of Default.  Each of the following events is herein, and
in the Notes, sometimes referred to as an Event of Default:


 


(a)                                  if
any representation or warranty made herein or in any other Loan Document, or in
any certificate, financial statement, Borrowing Base report, instrument or
other written statement furnished by the Borrower or any Subsidiary in
connection with this Agreement or any of the borrowings hereunder, shall be
false, inaccurate or misleading in any material respect when made or when
deemed made hereunder if the correction of such representation or warranty
would indicate, result in or reflect a Material Adverse Effect relative to the
representation or warranty as made; or if the Borrower or any Subsidiaries
repeatedly make false, inaccurate or misleading representations or warranties
in connection with this Agreement or any of the borrowings hereunder,
regardless of whether any such Material Adverse Effect is presented thereby;


 


(b)                                 any
default in the payment of any principal or interest under any of the Notes or
any other Obligations when the same shall be due and payable, whether at the
due date thereof or at a date required for prepayment or by acceleration or
otherwise, and the continuance of any such non-payment (in whole or in part)
for a period of three (3) Business Days;


 


(c)                                  any
default in the due observance or performance of any covenant, condition or
agreement contained in any Section of Article VI hereof, which, if
capable of being cured, is not fully cured within thirty (30) days after the
occurrence thereof; provided, however, 


 


34

















 


that if such Default is capable of cure but is not capable of being
cured with reasonable diligence within such thirty (30) day period, then such
cure period shall be extended for up to an additional thirty (30) days provided
that (i) the Borrower or the subject Subsidiary commenced such cure
promptly within the original thirty (30) day cure period and thereafter
continuously continues to effect such cure with reasonable diligence (and in
any event completes such cure within the extended cure period provided herein),
and (ii) no Material Adverse Effect exists or arises in respect of such
Default;


 


(d)                                 any
default in the due observance or performance of any covenant, condition or
agreement to be observed or performed under Article V hereof, or otherwise
pursuant to the terms hereof or any other Loan Document and not addressed in
Sections 7.01(a), (b) or (c), and the continuance of such default
unremedied for a period of thirty (30) days (five (5) Business Days in the
case of Section 5.01(d) hereof) after written notice thereof to the
Borrower, or such other cure period as may be provided in the applicable Loan
Document; provided, however, that if such Default (other than in
the case of Section 5.01(d) above) is capable of cure but is not
capable of being cured with reasonable diligence within such thirty (30) day
period, then such cure period shall be extended for up to an additional thirty
(30) days provided that (i) the Borrower or the subject Subsidiary
commenced such cure promptly within the original thirty (30) day cure period
and thereafter continuously continues to effect such cure with reasonable
diligence (and in any event completes such cure within the extended cure period
provided herein), and (ii) no Material Adverse Effect exists or arises in
respect of such Default;


 


(e)                                  any
“Default” under and as defined in the Revolving Loan Agreement, or any default
with respect to any Indebtedness for money borrowed of the Borrower or any of
the Subsidiaries (other than to the Lender) in an amount in excess of $75,000,
if the effect of such default is to permit the holder, with or without notice
or lapse of time or both, to accelerate the maturity of any such Indebtedness
for money borrowed or to cause such Indebtedness for money borrowed to become
due prior to the stated maturity thereof;


 


(f)                                    if
the Borrower or any Subsidiary shall: (i) apply for or consent to the
appointment of a receiver, trustee, custodian or liquidator of it or any of its
properties, (ii) admit in writing its inability to pay its debts as they
mature, (iii) make a general assignment for the benefit of creditors, (iv) be
adjudicated a bankrupt or insolvent or be the subject of an order for relief
under Title 11 of the United States Code, or (v) file a voluntary petition
in bankruptcy, or a petition or an answer seeking reorganization or an arrangement
with creditors or to take advantage or any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or liquidation law or statute, or
an answer admitting the material allegations of a petition filed against him or
it in any proceeding under any such law, or (vi) take or permit to be
taken any action in furtherance of or for the purpose of effecting any of the
foregoing;


 


(g)                                 if
any order, judgment or decree shall be entered, without the application,
approval or consent of the Borrower or any Subsidiary, by any court of
competent jurisdiction, approving a petition seeking reorganization of the
Borrower or any Subsidiary, or appointing a receiver, trustee, custodian or
liquidator of the Borrower or any Subsidiary, or of all or any substantial part
of its assets, and such order, judgment or decree shall continue unstayed and
in effect for any period of ninety (90) days;


 


35
















 


(h)                                 if final
judgment(s) for the payment of money in an uninsured amount in excess of
$75,000 individually or in the aggregate shall be rendered against the Borrower
and/or any Subsidiary, and the same shall remain undischarged or unbonded for a
period of thirty (30) consecutive days, during which execution shall not be
effectively stayed;


 


(i)                                     the occurrence
of any levy upon or seizure or attachment of, or any uninsured loss of or
damage to, any property of the Borrower or any Subsidiary having an aggregate
fair value or repair cost (as the case may be) in excess of $75,000
individually or in the aggregate, and any such levy, seizure or attachment
shall not be set aside, bonded or discharged within thirty (30) days after the
date thereof;


 


(j)                                     if any Lien purported
to be created by any Security Document shall cease to be a valid perfected
first priority Lien (subject only to any priority accorded by law to Permitted
Liens) on the assets or properties covered thereby (provided that if such
condition is due to a change in Applicable Law or any rectifiable event or
occurrence which terminates the ability to place a Lien on the subject asset,
an Event of Default shall not be deemed to exist by reason thereof unless the
Borrower or the subject Subsidiary fails, within ten (10) days after
written notice from the Lender, to take other lawful action which shall provide
to the Lender substantially the same benefit as the lost Lien), or the Borrower
or any Subsidiary shall assert in writing that any Lien purported to be created
by any Security Document is not a valid perfected first priority lien (subject
only to any priority accorded by law to Permitted Liens) on the assets or
properties purported to be covered thereby;


 


(k)                                  if (i) any
of the Loan Documents shall cease to be in full force and effect (other than as
a result of the discharge thereof in accordance with the terms thereof or by
written agreement of all parties thereto), provided that if such
condition is due to a change in Applicable Law, an Event of Default shall not
be deemed to exist by reason thereof unless the Borrower or the subject
Subsidiary fails, within ten (10) days after written notice from the
Lender, to take other lawful action which shall provide to the Lender
substantially the same rights and benefits as were provided to the Lender
immediately prior to such change in Applicable Law, or (ii) the Borrower
or any Subsidiary shall disclaim or deny the validity of any Loan Document or
its obligations thereunder; or


 


(l)                                     if the Borrower
or any Subsidiary shall be indicted for or convicted of any felony or crime of
moral turpitude.


 


Section 7.02.  Remedies.  Upon the occurrence of any Event of Default,
and at all times thereafter during the continuance thereof: (a) the Notes,
and any and all other Obligations, shall, at the Lender’s option (except in the
case of Sections 7.01(f) and 7.01(g) hereof, the occurrence of which
shall automatically effect acceleration, regardless of any action or
forbearance in respect of any prior or ongoing Default or Event of Default
which may be inconsistent with such automatic acceleration), become immediately
due and payable, both as to principal, interest and other charges, without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived, anything contained herein or in the Notes or other evidence
of such Obligations to the contrary notwithstanding, (b) all outstanding
Obligations under the Notes, and all other outstanding Obligations, shall bear
interest at the default rate of interest provided in the Notes, (c) the
Lender may file suit against the Borrower on the Notes and against the Borrower
and the Subsidiaries under the other Loan Documents and/or seek specific
performance or 


 


36

















 


injunctive
relief thereunder (whether or not a remedy exists at law or is adequate), (d) the
Lender shall have the right, in accordance with the Security Documents, to
exercise any and all remedies in respect of such or all of the Collateral as
the Lender may determine in its discretion (without any requirement of
marshalling of assets, or other such requirement), and (e) the Revolving
Credit Commitment shall, at the Lender’s option (except in the case of Sections
7.01(f) and 7/01(g) hereof, the occurrence of which shall
automatically effect termination, regardless of any action or forbearance in
respect of any prior or ongoing Default or Event of Default which may be
inconsistent with such automatic termination), be immediately terminated or
reduced, and the Lender shall be under no further obligation to consider making
any further Advances.


 


VIII.                        PARTICIPATING
LENDERS; ASSIGNMENT.


 


Section 8.01.  Participations.  Anything in this Agreement to the contrary
notwithstanding, the Lender may, at any time and from time to time, without in
any manner affecting or impairing the validity of any Obligations, transfer,
assign or grant participating interests in the Loans as the Lender shall in its
sole discretion determine, to such other Persons (the “Participants”) as
the Lender may determine.  Upon any such
transfer, assignment or granting of participating interests, the Participants
shall be deemed to be included within the term “Lender” for all purposes of
this Agreement, subject to such agreements and arrangements as the Lender and
the Participants may agree upon. Notwithstanding the granting of any such
participating interests: (a) the Borrower shall look solely to the Lender
for all purposes of this Agreement and the transactions contemplated hereby, (b) the
Borrower shall at all times have the right to rely upon any waivers or consents
signed by the Lender as being binding upon all of the Participants, and (c) all
communications in respect of this Agreement and such transactions shall remain
solely between the Borrower and the Lender (exclusive of Participants)
hereunder.


 


Section 8.02.  Transfer.  Anything in this Agreement to the contrary
notwithstanding, the Lender may, at any time and from time to time, without in
any manner affecting or impairing the validity of any Obligations, transfer and
assign all or any portion of its interest in this Agreement, the Notes and the
other Loan Documents to any Person (an “Assignee Lender”) as the Lender
may determine.  Upon any such transfer or
assignment, the Assignee Lender shall be deemed to succeed (to the extent of
the interest assigned) to the rights and obligations of the Lender for all
purposes of this Agreement.  In the event
of any transfer and assignment of the Lender’s entire interest in this
Agreement, the Notes and the Security Documents, the Lender shall be replaced
by the Assignee Lender as “Secured Party” under the Collateral Agreement and
all other Security Documents.


 


Section 8.03.  Recordation of Assignment.  In respect of any negotiation, transfer or assignment
of all or any portion of any Lender’s interest in this Agreement, any Note
and/or any other Loan Documents at any time and from time to time, the
following provisions shall be applicable:


 


(a)                                  The Borrower,
or any agent appointed by the Borrower, shall maintain a register (the “Register”)
in which there shall be recorded the name and address of each Person holding
any Note(s) hereunder or any commitment to lend hereunder, and the
principal amount payable to such Person under such Person’s Note(s) or
committed by such Person under such Person’s lending commitment.  The Borrower hereby irrevocably appoints the
Lender (and/or 


 


37

















 


any
subsequent Lender appointed by the Lender then maintaining the Register) as the
Borrower’s agent for the purpose of maintaining the Register.


 


(b)                                 In connection
with any negotiation, transfer or assignment as aforesaid, the
transferor/assignor shall deliver to the Lender then maintaining the Register
an assignment and assumption agreement executed by the transferor/assignor and
the transferee/assignee, setting forth the specifics of the subject
transaction, including but not limited to the amount and nature of Obligations
and/or lending commitments being transferred or assigned (and being assumed, as
applicable), and the proposed effective date of such transfer or assignment and
the related assumption (if applicable).


 


(c)                                  Subject to
receipt of completed tax forms (indicating withholding status, or exemption
from withholding, as applicable, of the transferee/assignee) reasonably
required by the Person then maintaining the Register, and (if required by such
Person) surrender of the negotiated, transferred or assigned Note(s) for
reissuance by the Borrower, such Person shall record the subject transfer,
assignment and assumption in the Register. 
Anything contained in any Note or other Loan Document to the contrary
notwithstanding, no negotiation, transfer or assignment shall be effective until
it is recorded in the Register pursuant to this Section 8.03(c).  The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error; and the
Borrower and each Lender shall treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Agreement.  The Register shall be available for
inspection by the Borrower and each Lender at any reasonable time and from time
to time upon reasonable prior notice.


 


IX.                                MISCELLANEOUS


 


Section 9.01.  Survival.  This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto, shall survive the making by the Lender of the Loans and the
execution and delivery to the Lender of the Notes, and shall continue in full
force and effect for so long as the Notes or any other Obligations are
outstanding and unpaid.  Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and permitted assigns of such party; and all
covenants, promises and agreements in this Agreement contained, by or on behalf
of the Borrower shall inure to the benefit of the successors and assigns of the
Lender.


 


Section 9.02.  Indemnification.  The Borrower shall indemnify the Lender and
its managers, directors, officers, employees, attorneys and agents against, and
shall hold the Lender and such Persons harmless from, any and all losses,
claims, damages and liabilities and related expenses, including reasonable
counsel fees and expenses, incurred by the Lender or any such Person arising
out of, in any way connected with, or as a result of: (a) the use of any
of the proceeds of the Loans made by the Lender to the Borrower; (b) this
Agreement, the ownership and operation of the Borrower’s and any Subsidiary’s
assets, including all Real Properties and improvements or any Contract, the
performance by the Borrower or any other Person of their respective obligations
thereunder, and the consummation of the transactions contemplated by this
Agreement; (c) any finder’s fee, brokerage commission of other such
obligation payable or alleged to be payable in respect of the transactions
contemplated by this Agreement which arises or is alleged to arise from any
agreement, action or conduct of the Borrower or any of its Affiliates, and/or (d) any
claim, litigation, investigation or proceeding relating to any of the 


 


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foregoing,
whether or not the Lender or its managers, directors, officers, employees,
attorneys or agents are a party thereto; provided that such indemnity
shall not apply to any such losses, claims, damages, liabilities or related
expenses arising from (i) any unexcused breach by the Lender of any of its
obligations under this Agreement, (ii) the willful misconduct or gross
negligence of the Lender as determined by a final, non-appealable judgment of a
court of competent jurisdiction, or (iii) the breach of any commitment or
legal obligation of the Lender to any Person other than the Borrower or its
Affiliates, provided that such breach is determined pursuant to a final
and nonappealable decision of a court of competent jurisdiction.  The foregoing indemnity shall remain
operative and in full force and effect regardless of the expiration or any termination
of this Agreement, the consummation of the transactions contemplated by this
Agreement, the repayment of the Loans, the invalidity or unenforceability of
any term or provision of any Loan Document, any investigation made by or on
behalf of the Lender, and the content or accuracy of any representation or
warranty made by the Borrower or any Subsidiary in any Loan Document.  All amounts due under this Section 9.02
shall be payable on written demand therefor.


 


Section 9.03.  Governing Law.  This Agreement and the other Loan Documents
shall (irrespective of where same are executed and delivered) be governed by
and construed in accordance with the laws of the State of New York (without
giving effect to principles of conflicts of laws).


 


Section 9.04.  Waiver and Amendment.  Neither any modification or waiver of any
provision of this Agreement, the Notes, or any other Loan Document, nor any
consent to any departure by the Borrower or any Subsidiary therefrom, shall in
any event be effective unless the same shall be set forth in writing duly
signed or acknowledged by the Lender and all parties to such Loan Document, and
then such waiver or consent shall be effective only in the specific instance,
and for the specific purpose, for which given. 
No notice to or demand on the Borrower in any instance shall entitle the
Borrower to any other or future notice or demand in the same, similar or other
circumstances.


 


Section 9.05.  Reservation of Remedies.  Neither any failure nor any delay on the part
of the Lender in exercising any right, power or privilege hereunder or under
the Notes or any other Loan Document shall operate as a waiver thereof, nor
shall a single or partial exercise thereof preclude any other or future
exercise, or the exercise of any other right, power or privilege.


 


Section 9.06.  Notices.  All notices, requests, demands and other
communications under or in respect of this Agreement or any transactions
hereunder shall be in writing (which may include telegraphic or telecopied
communication) and shall be personally delivered or mailed (by prepaid
registered or certified mail, return receipt requested), sent by prepaid
recognized overnight courier service, or telegraphed or telecopied by facsimile
transmission to the applicable party at its address or telecopier number
indicated below.


 


If to the Lender:


 


ComVest Capital, LLC


One North Clematis, Suite 300


West Palm Beach, FL 33401


Attention: Chief Financial
Officer


Telecopier: (212) 829-5986


 


39

















 


with a copy to:


 


Greenberg Traurig, LLP


200 Park Avenue


New York, New York  10166


Attention:  Shahe Sinanian, Esq.


Telecopier: (212) 801-6400


 


If to the Borrower:


 


Crdentia Corp.


5001 LBJ Freeway, Suite 850


Dallas, Texas 75244


Attention:  James TerBeest


Telecopier: (972) 392-2722


 


with a copy to:


 


Kane Russell Coleman &
Logan, P.C.


1601 Elm Street, Suite 3700


Dallas, Texas  75201


Attention:  Patrick V. Stark, Esq.


Telecopier: (214) 777-4299


 


or, as to each party, at
such other address or telecopier number as shall be designated by such party in
a written notice to the other party delivered as aforesaid.  All such notices, requests, demands and other
communications shall be deemed given (a) when personally delivered, (b) three
(3) Business Days after being deposited in the mails with postage prepaid
(by registered or certified mail, return receipt requested), (c) one (1) Business
Day after being delivered to the telegraph company or overnight courier
service, if prepaid and sent overnight delivery, addressed as aforesaid and
with all charges prepaid or billed to the account of the sender, or (d) when
sent by facsimile transmission to a telecopier number designated by such
addressee.


 


Section 9.07.  Binding Effect.  This Agreement shall be binding upon and
inure to the benefit of the Borrower and the Lender and their respective
successors and assigns, except that the Borrower shall not assign any of its
rights or obligations hereunder without the prior written consent of the
Lender.


 


Section 9.08.  Consent to Jurisdiction; Waiver of Jury Trial.  The Borrower hereby consents to the
jurisdiction of all courts of the State of New York and the United States
District Court for the Southern District of New York, as well as to the
jurisdiction of all courts from which an appeal may be taken from such courts,
for the purpose of any suit, action or other proceeding arising out of or with
respect to this Agreement, any other Loan Document, any other agreements,
instruments, certificates or other documents executed in connection herewith or
therewith, or any of the transactions contemplated hereby or thereby, or any of
the Borrower’s or any Subsidiary’s obligations hereunder or thereunder.  The Borrower hereby waives the right to 


 


40

















 


interpose
any counterclaims (other than compulsory counterclaims) in any action brought
by the Lender hereunder or in respect of any other Loan Document, provided that
this waiver shall not preclude the Borrower from pursuing any such claims by
means of separate proceedings.  THE
BORROWER HEREBY EXPRESSLY WAIVES ANY AND ALL OBJECTIONS WHICH IT MAY HAVE
AS TO VENUE IN ANY OF SUCH COURTS, AND ALSO WAIVES TRIAL BY JURY IN ANY SUCH
SUIT, ACTION OR PROCEEDING.  The Lender
may file a copy of this Agreement as evidence of the foregoing waiver of right
to jury trial.


 


Section 9.09.  Certain Waivers.  The Borrower and the Lender each hereby
waives any claims for special, consequential or punitive damages in any way
arising out of or relating to this Agreement, any of the other Loan Documents,
or any breach hereof or thereof.


 


Section 9.10.  Severability.  If any provision of this Agreement is held by
a court of competent jurisdiction to be invalid or unenforceable, either in its
entirety or by virtue of its scope or application to given circumstances, such
provision shall thereupon be deemed modified only to the extent necessary to
render same valid, or not applicable to given circumstances, or excised from
this Agreement, as the situation may require, and this Agreement shall be
construed and enforced as if such provision had been included herein as so
modified in scope or application, or had not been included herein, as the case
may be.


 


Section 9.11.  Captions.  The Article and Section headings in
this Agreement are included herein for convenience of reference only, and shall
not affect the construction or interpretation of any provision of this
Agreement.


 


Section 9.12.  Sole and Entire Agreement.  This Agreement, the Notes, the other Loan
Documents, and the other agreements, instruments, certificates and documents
referred to or described herein and therein constitute the sole and entire
agreement and understanding between the parties hereto as to the subject matter
hereof, and supersede all prior discussions, agreements and understandings of
every kind and nature between the parties as to such subject matter.


 


Section 9.13.  Confidentiality.  The Lender shall not disclose any
Confidential Information to any Person without the prior consent of the
Borrower; provided, however, that nothing herein contained shall
limit any disclosure of the tax structure of the transactions contemplated
hereby, or the disclosure of any information (a) to the extent required by
statute, rule, regulation or judicial process, (b) to counsel, accountants
and other professional advisors for the Lender, (c) to bank examiners,
auditors, accountants or, if required by law, any regulatory authority, (d) to
the officers, partners, managers, directors, employees, agents and advisors
(including independent auditors and counsel) of the Lender, (e) in
connection with any litigation which relates to this Agreement to which the
Lender is a party, (f) to a subsidiary or Affiliate of the Lender, or (g) to
any assignee or participant (or prospective assignee or participant) which
agrees to be bound by this Section 9.13, and  further  provided,
that in no event shall the Lender be obligated or required to return any
materials furnished by the Borrower.  The
obligations of the Lender under this Section 9.13 shall supersede and
replace the obligations of the Lender under any confidentiality letter in
respect of this financing previously signed and delivered by the Lender to the
Borrower.


 


Section 9.14.  Counterparts; Fax Signatures.  This Agreement may be executed in any number
of counterparts, all of which shall constitute one and the same agreement.  This 


 


41

















 


Agreement
may be executed by fax signatures, each of which shall be fully binding on the
signing party.


 


Section 9.15.  Short Selling.  Until the earlier of (a) the Term Loans
Maturity Date, or (b) the repayment in full of the Term Loans, ComVest
Capital, LLC and its Affiliates shall not engage in any uncovered short sales
of Common Stock (provided that, for purposes of this Section 9.15, the
sale of or commitment to sell shares which may be acquired by ComVest Capital,
LLC from the exercise of the Warrant shall not be deemed to be an uncovered
short sale).


 


Section 9.16.  Effect on other Loan Documents.  From and after the Closing Date, (a) this
Agreement shall amend, modify and supersede the Original Agreement in its
entirety, provided that this Agreement shall not revoke any transactions
effected under the Original Agreement or effect a novation of any Obligations
outstanding under the Original Agreement, (b) all references to the “Loan
Agreement” in the various Loan Documents shall be deemed to refer to this
Agreement, and (c) all references to the “Notes” contained in the various
Loan Documents shall mean and refer to the Notes issued pursuant to this
Agreement.


 


[The remainder of this page is intentionally blank]


 


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IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be duly executed by their duly authorized
officer as of the day and year first written above.


 


	
   

  	
  COMVEST CAPITAL, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary E. Jaggard

  
	
   

  	
   

  	
  Name: Gary E. Jaggard

  
	
   

  	
   

  	
  Title: Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CRDENTIA CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John B.
  Kaiser

  
	
   

  	
   

  	
  Name: John B.
  Kaiser

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  



 


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